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

Dawsons Ltd v Bonnin 10
A furniture removal firm in Glasgow (Dawsons) took out insurance for one of
its removal lorries. The proposal form included the following clause: “which
proposal shall be the basis of this contract and be held as incorporated
herein”. This converted all the answers on the form into warranties.
Dawsons filled out the form, and gave its business address in central
Glasgow. When it was asked where the lorry would normally be parked it
inadvertently wrote “above address”. In fact, the lorry was usually parked in
the outskirts of Glasgow.
The lorry was destroyed in a fire and Dawsons made a claim. At Court, it was
argued that Dawsons’ mistake about the address did not add to the risk and
arguably reduced it. The Court held that this did not matter: the insurance
company was entitled to refuse to pay all claims under the policy.
(3) Where a policyholder gives a warranty about future actions, any breach
will discharge the insurer from all further liability, even from claims that
have no connection with the breach. For example, if a policyholder
warrants that they will maintain a burglar alarm, any failure to do so may
(depending on the construction of the contract) allow the insurer to refuse
a claim for storm damage or flood. The insurer may also refuse claims for
burglary arising after the alarm has been repaired.
Misrepresentation and non-disclosure before the contract is made when
the contract is made through an intermediary
1.15 Insurance is often arranged through a broker or an intermediary. If the
policyholder gives correct information to a broker, but the broker fails to pass on
the information to the insurer, or passes it on incorrectly, the insurer will
frequently have the right to avoid the policy even though the policyholder may not
have been at fault. The policyholder may have thought he was dealing with a
representative of the insurer and the insurer may have been in a better position to
prevent mistakes occurring.
PREVIOUS CRITICISMS OF THE LAW
1.16 Recommendations for reform of the topics covered by this consultation paper
were made by the Law Reform Committee as long ago as 1957. 11 In the fifty
years since, several authoritative reports have subjected insurance contract law
to severe criticism. Details of these reports are set out in Appendix A, together
with a history of the government’s and industry’s response.
10 [1922] 2 AC 413; 1922 SC (HL) 156.
11 Fifth Report of the Law Reform Committee (1957) Cmnd 62. However, in the same year a
report by the Law Reform Committee for Scotland made no proposals for reform,
concluding that there was "no demand in Scotland for any alteration in the law with regard
to the subject of our remit": Fourth Report of the Law Reform Committee for Scotland
(1957) Cmnd 330, para 25.
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