Moral hazard as a material fact in the assessment of the risk

Abstract

From text: In the context of the law of insurance, moral hazard, also referred to as moral risk (see for example Peter Havenga ‘The Financial Position of an Insured and Serious Threats of Physical Attack on Insured Property as Material Facts’ (1995) 7 SA Merc LJ 110) generally refers to the financial position of the insured. In practice, however, hazard/risk refers to the ‘serious financial difficulties’ or ‘poor financial history’ of the insured, manifested in most cases by the insured’s actual but in other cases factual insolvency. Questions which arise are whether this hazard/risk is a  material fact which should be disclosed on conclusion of a contract of insurance (or on renewal, if the contract is renewable), and whether if this is not done the insurer can avoid liability on that basis.