The insurer’s obligation to inform the policyholder following discovery of non disclosure

When an insurer discovers that a policyholder has withheld information when taking out an insurance policy, it should be alert to react to such event in a timely and adequate manner. The law stipulates a formal requirement if the insurer wishes to bear the consequences of this non-compliance with the obligation by the policyholder to provide information. According to Article 7:929 Paragraph 1 of the Civil Code, the insurer may only invoke the consequences if it brings this to the attention (of the policyholder) "within two months following the discovery of the non-disclosure and stating the possible consequences". In practice this very provision appears to incite all kinds of difficult questions. There is sufficient reason to examine in further detail when the "discovery" by the insurer is a matter of fact and what the obligation of the insurer to provide notification implies subsequently. Attention shall also be paid to the question of how compelling the two-month period is, and with whom the burden of proof rests. (British Insurance Law Association Journal December 2009, no. 118)