LAW OF OBLIGATION ACT, PART 4, CHAPTER 23, DIVISION 3

Division 3

Increase in Probability of Insured Risk 

  • 443. Notification of increase in probability of insured risk

A policyholder shall immediately notify the insurer of an increase in the probability of the insured risk, unless the increase in the probability of the insured risk is caused by circumstances which are common knowledge and which do not affect the insured risk of this policyholder alone.

  • 444. Prohibition on increasing probability of insured risk

After entering into a contract, a policyholder shall not increase the probability of the insured risk without the consent of the insurer or allow the risk to be increased by persons for whom the policyholder is responsible.

  • 445. Release of insurer from obligation to perform insurance contract upon increase in probability of insured risk

(1) If a policyholder violates the requirement provided for in § 443 of this Act, the insurer shall be released from the obligation to perform the insurance contract if the insured event occurs at least one month after the time when the insurer should have received the notice unless, at the time when the insurer should have received the notice, the insurer was or should have been aware of the increase in the probability of the insured risk.

(2) If a policyholder violates the requirement provided for in § 444 of this Act, the insurer shall be released from the obligation to perform the insurance contract to the extent of the increase in the probability of the insured risk due to the circumstances caused by the policyholder, if the insured event occurs after an increase in the insured risk.

(3) The provisions of subsections (1) and (2) of this section shall not apply if:

1) by the time the insured event occurs, the term for the insurer to cancel the contract due to an increase in the probability of the insured risk or to request amendment thereof has expired without the insurer cancelling the contract or requesting amendment thereof;

2) the increase in the probability of the insured risk had no bearing on the occurrence of the insured event;

3) a higher insured risk would not have affected the validity or scope of the insurer’s performance obligation;

4) the increase in the probability of the insured risk was the fault of the insurer.

(4) If, pursuant to the provisions of subsection (1) or (2) of this section, an insurer is released from the performance obligation only with respect to certain insured objects or persons, the insurer shall be released from the entire performance obligation if, under the circumstances, it can be presumed that the insurer would not have entered into the contract on the same terms solely for such objects or persons.

  • 446. Amendment and cancellation of contract in event of increase in probability of insured risk

(1) If a policyholder violates the obligation provided for in § 444 of this Act, the insurer may cancel the insurance contract without prior notice. If the violation was not the fault of the policyholder, the insurer may cancel the contract by giving one month’s advance notice.

(2) If the probability of the insured risk increased due to a change effected by the policyholder without the consent of the insurer and the policyholder failed to give notice of the increase in the probability of the insured risk in time, the insurer may cancel the insurance contract without prior notice. If the policyholder was not responsible for the violation of the prohibition on increasing the probability of the insured risk, the insurer may cancel the contract by giving one month’s advance notice.

(3) If the insured risk increases after entry into the contract and independently of the policyholder, the insurer may demand amendment of the contract retroactively, as of the increase in the insured risk. If the policyholder does not agree to the amendment of the contract or if the insurer would not have entered into the contract under the circumstances of the increased insured risk, the insurer may cancel the contract by giving one month’s advance notice.

(4) The insurer’s right to demand amendment of a contract or to cancel the contract in the cases specified in subsections (1) to (3) of this section expires if the insurer does not exercise the right within one month as of becoming aware of the increase in the insured risk. The insurer also has the right to cancel the contract in the cases specified in subsections (1) to (3) of this section even if the situation prior to the increase in the insured risk is restored.

(5) The provisions of subsections (1) to (4) of this section do not apply if the insured risk increased due to circumstances related to the insurer.

  • 447. Application of provisions

(1) The provisions of this Division shall also apply to an increase in the insured risk which took place during the period of time between the submission of an application to enter into a contract by the policyholder and entry into the contract if the insurer was not aware of the increase in the insured risk at the time of entering into the contract.

(2) The provisions of this Division shall not apply if an increase in the insured risk is insignificant or if the parties to the contract agree that the increase in the insured risk does not affect the insurance contract.

(3) The provisions of this Division shall not affect any agreement by which the policyholder undertakes to reduce the insured risk or prevent the insured risk from increasing.

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