Italian insurance law provide remedy to avoid coverage whenever underwriters have been induced to enter into a contract of insurance on the basis of incorrect information or where there are underlying facts that underwriters were not aware of and which would have had an influence on underwriters accepting the risk or request higher premium.
Italian Case Law [1] requires that in order to rescind a contract of insurance on the grounds of misrepresentation/non-disclosure, an Italian Court shall be satisfied of the following conditions:
1) that the representation is incorrect or incomplete;
2) that the representation/non-disclosure is made intentionally or negligently;
3) that the representation was material in influencing the insurer in agreeing to bear the risk.
In general terms, a fact or matter is regarded as being material if it would have been taken into account by a hypothetical prudent insurer when assessing the risk. In the context, the test is objective [2].
A prudent underwriter is presumed to know matters which he should have known from his experience and in the absence of inquiry there is no need to disclose a fact or matter that the insurer already knows, or is presumed to know [3].
A prudent underwriter is presumed to know the ordinary incidents of any peculiar or specialist risk he undertakes: every underwriter is presumed to be acquainted with the practice of the trade he insures; if he does not know, then he ought to inform himself, acting in a proactive way [4].
To justify avoidance, the misrepresentation/non-disclosure must be a real and substantial cause affecting the decision making process of the insurer to enter into the contract.
Relevance could be also given to the amount of the agreed premium to be matched with the potential liability of the cover.
[1] Lastly Supreme Court of 22/03/2013 n°7273 in Diritto & Giustizia 25.3.2013.
[2] Since Supreme Court 18.1.1979 n°348 RCP 1979, 740.
[3] Supreme Court 1989 n°2396 in Dir Econ, assic. 1990, 149.
[4] Supreme Court 19.5.1989 n°2396, CG 1989, 979.
