Innocent Non-Disclosure Clause
The innocent non-disclosure clause protects a good-faith co-insured from having another insured's intentional or negligent breach of the duty of disclosure imputed to them, provided they had no knowledge of the undisclosed circumstances themselves.
- Clause type
- Condition
- Origin/Market
- London Market (LMA/NMA/Lloyd’s)
- Favours
- Insured
- Negotiability
- Negotiable
Purpose
On policies with several co-insureds, for example in group programmes or D&O cover for multiple officers, the question arises whether one insured’s incorrect or incomplete disclosure at application stage also prejudices the other, innocent co-insureds. The innocent non-disclosure clause answers this in the negative: anyone who has acted honestly and had no knowledge of the relevant circumstances retains their cover, even where another co-insured withheld or misstated information.
Effect and limits
The clause only benefits persons who were genuinely uninvolved and acted in good faith; anyone who knew of the undisclosed circumstances or participated in the breach remains unprotected. It also does not help where the policy as a whole is void from inception — for example because of fraud by the company itself — since in that case there is no cover left to protect.
Negotiation and practice
Particularly in D&O programmes covering several officers, a clear non-imputation provision is essential so that individual, honest officers do not lose their cover because of another’s misconduct. When negotiating, it should be checked whether the clause also applies to the company itself as an insured or is expressly limited to natural persons.