Depending on the wording of an insurance policy, a breach by the insured will not necessarily entitle the insurer to cancel the policy without a specific right to do so. According to the wording or, if not explicitly dealt with, the materiality of the breach, the insurer may only have a damages claim for loss resulting from the breach.

For instance an insured’s failure to provide information reasonably required by the insurer in relation to a claim may lead to a claim for damages for the additional cost to which the insurer has been put in getting the information itself, rather than cancellation. Cancellation for breach should be explicitly provided for. The overhang from the Multimark wording refers to a breach leading to a section of the policy being void and it does not cover the example just given for instance.

It is interesting that the Australian Insurance Contracts Act 1984 provides that “where the effect of a contract of insurance would, but for this section, be that the insurer may refuse to pay a claim by reason of some act of the insured or some other person that occurred after the contract was entered into … the insurer may not refuse to pay the claim but the insurer’s liability is reduced by the amount that fairly represents the extent to which the insurer’s interests were prejudiced as a result of that act” (not an exact quote).

That is a fair summary of the type of damages claim that would result from a breach without a express cancellation right.

For instance, where specific requirements must be met for the claim to be made (such as reporting the claim within a certain period), the policy must be explicit as to the consequences of a failure to comply.