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

1.17 When in 1980 the English Law Commission considered non-disclosure and
breach of warranty, its conclusion was that the law was “undoubtedly in need of
reform” and that such reform had been “too long delayed”. 12 Reform was also
urged in a report published by the National Consumer Council (NCC) in 1997. 13
1.18 A major factor in our decision to return to this area was a report by the British
Insurance Law Association (BILA) in 2002. 14 This report was prepared by a subcommittee
with an impressive breadth of membership — academics, brokers,
insurers, lawyers, loss adjusters, a self-regulatory body and trade associations. It
included the text of lectures given by two senior members of the judiciary, Lord
Justice Longmore and Lord Justice Rix, and a foreword contributed by Lord
Justice Mance. 15 BILA declared itself “satisfied that there is a need for reform”
and put forward detailed proposals for change.
1.19 Despite the many proposals for reform, there has been no change. This is not
because the insurance industry has sought to justify the 1906 Act: it has long
accepted that many of the rules set out in the Act are inappropriate for a modern
consumer market. Instead, the Association of British Insurers and its predecessor
have argued that any changes are best dealt with as a matter of self-regulation or
ombudsman discretion, rather than by a change in the law itself. We describe
these developments below and say why we do not think they are a substitute for
law reform.
DEVELOPMENTS AFFECTING CONSUMERS
Self-regulation rather than legislative change
1.20 In 1977 the industry bodies issued Statements of Practice, covering both general
insurance and life insurance, by which insurers undertook not to enforce the strict
letter of the law unreasonably. In 1980 the Law Commission strongly criticised
this approach, because:
(1) the statements did not have the force of law and, indeed, the liquidator of
an insurance company would be bound to disregard them;
(2) they left insurers as the sole judge of whether rejection of a claim was
reasonable;
(3) they only covered policyholders in their private capacity and did not
protect businesses.
12
Insurance Law, Non-Disclosure and Breach of Warranty (1980) Law Com No 104, para
1.21.
13
National Consumer Council, Insurance Law Reform: the consumer case for review of
insurance law (May 1997).
14
British Insurance Law Association, Insurance Contract Law Reform – Recommendations to
the Law Commissions (2002).
15 As he then was.
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