Study On The Legal Consequences Of Breaching The Duty Of Disclosure

The precise for insurance system to function properly is to accurately selectrisk. The applicant or the insurant is the one who owns or holds the object ofinsurance and the one who knows the risk.It is the convenient and economicalway for the insurer to get information of risk. The duty of disclosure aims at tohelp the insurer to get information from the applicant or the insurant. Accordingto Insurance Law and Contract Law, when the applicant or the insurant breachthe duty, the insurer will respectively have the right to terminate the insurancecontract. There is some dispute on the application of these two rights: the right inInsurance Law should be applied first, the insurer has right to choose and therights should be used according to the condition. There are some problems forapplying the right in Insurance Law: the right might lead to unfair consequencesand the right should to be used in valid contract. These dispute and problemsshow that the provisions on the duty of disclosure should be improved.The thesis is divided into three parts.The first part is about the introduction of the duty of disclosure and thelegal constitution of breaching the duty. The duty of disclosure is a duty for theapplicant or the insurant to notify the insurer the risk when or before theyconclude an insurance contract. It is a pre-contract obligation and aims athelping the insurer to get information. In China, the applicant is the person whobears the obligation. The matters the applicant should tell is those the insurerhave already asked and the applicant have known before or at the moment thecontract is concluded. Moreover, the matter should be important and the insurerdoes not know. When the applicant breaches the duty, he or she should do itintentionally or by active negligence. For the latter, the insurer should not bearthe duty to pay insurance proceeds only in the situation that the important matterthe applicant did not tell or wrongfully tell seriously affect insurance accident.The second part is about the legal consequences of breaching the duty ofdisclosure. According to Insurance Law and Contract Law, when the applicant breaches the duty, the insurer respectively has the right to terminate theinsurance contract, then concurrence exists. There are three opinions in dealingwith the relation between these two kinds of right: the right in Insurance Lawshould be applied first, the insurer has right to choose and the rights should beused according to the condition. There are some problems for applying the rightin Insurance Law: the right might lead to unfair consequences and the right lackof legal principle basis. The right in Contract Law can overcome the deficiencyin the right in Insurance Law.The third part is about the improvement suggestions on Article16ofInsurance Law. Set the insurant to be the duty bearer; make clear that the insurershould query in written form; make clear that the insurer should judge on“objective reasonable insurer’s standard”; remove the matters “the insurershould know” from the matters the applicant and the insurant should tell; makeclear the person the insurance should notify when he apply the right and how tonotice; use the theory of proportionality for reference; perfect the method ofapplication; shorten the term of exercise.