Misrepresentation, Non-Disclosure and Breach ... - Law Commission

Such evidence will usually be readily available to the insurers, who will
have no difficulty in selecting appropriate witnesses. However the
insured will often be at a considerable disadvantage in finding expert
witnesses prepared to challenge those of the insurer and the position of
such witnesses is often invidious. Some judicial doubt has also been
cast on the cogency of such evidence. 23
5.72 We expect that in many cases involving businesses, judges would indeed draw
on their own understanding to ask how a reasonable business of the kind
involved would regard the matter. The parties may feel it unnecessary to provide
expert evidence.
5.73 However, in more specialist markets, there will still be a need for expert evidence.
We do not see that receiving evidence will be problematic. The court would hear
evidence of what, in the witness’s experience, the insured could reasonably have
been expected to appreciate, in the light of what they were told and the general
circumstances. We anticipate that this evidence may be given by a range of
experienced professionals, including insureds, brokers or underwriters.
Questions and warnings
5.74 It would always be open to the insurer to make it clear to the insured that some
particular fact is relevant, even though this might not occur to the reasonable
insured. The most obvious way to do this is by asking specific questions.
Alternatively, a warning may be given that the proposer should disclose particular
kinds of information, for instance information about the criminal records of
employees.
Over-disclosure
5.75 It has been put to us that the current law sometimes operates against the
interests of insurers in that they get too much information when the insured is
sophisticated. The duty of disclosure is so wide and, to many insureds, so
imprecise that an insured may conclude that the safest option is to give the
insurer all the information it is able to gather. We have been told that applicants
often provide insurers with more information than they are able to process. As
one experienced insurance lawyer put it:
We are now at the stage where commercial brokers are tending to walk
into underwriters with three CDs and tell them, ‘it’s all in there’.
22
BILA, Insurance Contract Law Reform – Recommendations to the Law Commissions
(2002) para 12.
23
Insurance Law, Non-Disclosure and Breach of Warranty, Law Com No 104, para 3.21. For
judicial criticism of insurers’ evidence, see Roselodge Ltd v Castle [1966] 2 Lloyd’s Rep
113, 132. The judge dismissed the evidence of three expert underwriters on the grounds
that they were far from objective: “they were anxious to defeat the claim if it could be
legitimately defeated”. In Reynolds v Phoenix Assurance Co, the judge also disbelieved
the insurers’ witnesses’ claims that evidence of a previous conviction was material by
pointing out how rarely any insurer was actually told about such convictions: [1978] 2
Lloyd’s Rep 440, 460. See also J Birds and N Hind, Birds Modern Insurance Law (6 th ed,
2004), p 116.
134