BERMUDA Law and Practice Contributed by: Brad Adderley, Matthew Carr, Max Tetlow, Cathryn Minors, Josephine Noddings, Aleisha Hollis, Melinda Mayne, Milaun Perott and Mya Gibbons, Appleby
5. Distribution 5.1 Distribution of Insurance and Reinsurance Products Distribution of domestic insurance products in Bermu- da is undertaken directly by insurers or via insurance intermediaries, such as brokers or agents. 6. Making an Insurance Contract 6.1 Obligations of the Insured and Insurer The obligations of the insured and insurer will be gov- erned by the contract entered into between the par- ties. Generally, the duty of the insured is to disclose material facts that a prudent insurer would take into account when reaching the decision of whether or not to accept the insurance risk. 6.2 Failure to Comply With Obligations of an Insurance Contract Under the Insurance Act, the BMA has powers of intervention and direction in circumstances where the insurer is failing or there is reason to believe the insurer is failing to comply with its statutory obliga- tions under the Insurance Act. The penalties on failure to comply with the obligations as detailed between the insurer and the insured in the insurance contract are subject to the provisions of the contract, in addition to any penalties implemented subject to any dispute resolution the parties undertake. Consequences of the Insured’s Fraudulence If the insured fraudulently provides incorrect informa- tion or fails to disclose facts of importance during the negotiation of the insurance contract, the contract is not binding upon the insurance company and will be deemed null and void. Consequences of the Insured’s Negligence If the insured provides incorrect information or fails to disclose facts of importance by negligence, the insur- ance company will only be liable on a pro rata basis, calculated based on the premium. The insurer must document what premium they would have claimed had the correct facts been known, and the insurance claim is calculated on this basis.
Would the insurer presumably not have offered insur- ance to the insured had the correct information been disclosed, the insurer is exempt from liability. If the insured did not know or could not have been expected to know that the information provided by them was incorrect, the insurer is liable to the same extent as they would have been had no incorrect information been given. 6.3 Intermediary Involvement in an Insurance Contract Insurance managers, brokers, agents and insurance marketplace providers are all intermediaries in Ber- muda. These range from individuals to large firms. Intermediaries are third parties that facilitate the placement and purchase of insurance, and provide services to insurance companies and their consumers that complement the insurance placement process; that is: • taking account of the interests of the customer; • only recommending insurance solutions that are appropriate for the customer; and • providing the customer with information regarding the distributed insurance product as well as the intermediary’s business and the way in which the intermediary is remunerated. 6.4 Legal Requirements and Distinguishing Features of an Insurance Contract There is no statutory definition under the Insurance Act of an insurance contract under Bermuda law, and no explicit legal requirements that must be fulfilled for a contract to constitute an insurance contract. 6.5 Multiple Insured or Potential Beneficiaries A third party may enforce a term of an insurance or reinsurance contract governed by Bermuda law in its own right if: • the third party is expressly identified in the contract by name, as a member of a class or as answering a particular description, which includes a person nominated or otherwise identified pursuant to the terms of the contract (the third party need not have been in existence when the contract was entered into); and
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