Although it would appear contrary to common sense for the insured to be able to increase the risk with impunity after the contract of insurance has incepted, it is perfectly possible for him to do so provided that there has been no breach of the duty of good faith and that whatever facts were represented or warranted to the insurer as correct at the date of the contract were correct at that time.
The distinction that must be drawn is that between an alteration of the risk and an alteration of the subject matter insured. Where the subject matter of the contract is materially altered, then this effectively constitutes a substitution of a new risk, and the premise upon which the insurance was agreed is negated.
ARPI insurers often include a condition avoiding the policy following alteration of the risk unless their written approval is obtained, as follows:
"This policy shall be avoided with respect to any item in regard to which there is any alteration after the commencement of this insurance -
- by removal; or
- whereby the risk of Damage is increased; or
- whereby the Insured's interest ceases except by will or operation of law unless the alteration is admitted in writing by the Insurers, except that workmen are allowed in and about any of the premises for the purposes of carrying out minor alterations, decoration, repairs, general maintenance and the like."
Mere notification of an alteration is not usually adequate to discharge this obligation. Alternatively, the ARPI policy may provide for payment by the insured of an additional premium relating to the increase in value, or even make no charge until renewal provided the value of the additions or alterations to the premises is no more than 10 per cent of the sum insured.
The distinction that must be drawn is that between an alteration of the risk and an alteration of the subject matter insured. Where the subject matter of the contract is materially altered, then this effectively constitutes a substitution of a new risk, and the premise upon which the insurance was agreed is negated.
ARPI insurers often include a condition avoiding the policy following alteration of the risk unless their written approval is obtained, as follows:
"This policy shall be avoided with respect to any item in regard to which there is any alteration after the commencement of this insurance -
- by removal; or
- whereby the risk of Damage is increased; or
- whereby the Insured's interest ceases except by will or operation of law unless the alteration is admitted in writing by the Insurers, except that workmen are allowed in and about any of the premises for the purposes of carrying out minor alterations, decoration, repairs, general maintenance and the like."
Mere notification of an alteration is not usually adequate to discharge this obligation. Alternatively, the ARPI policy may provide for payment by the insured of an additional premium relating to the increase in value, or even make no charge until renewal provided the value of the additions or alterations to the premises is no more than 10 per cent of the sum insured.
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