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

PART 10
PRE-CONTRACT INFORMATION AND
INTERMEDIARIES: PROPOSALS FOR REFORM
10.1 In this Part we consider reforms to address the problems that arise where an
intermediary has given poor advice about completing a proposal form or has
failed to pass accurate information to an insurer. We consider consumer
insurance first, followed by business insurance.
CONSUMERS
10.2 We start by discussing what is at stake in issues concerning the intermediary’s
status. We then outline the possible justifications for making insurers responsible
for their agents. We think there is a need to clarify the law in this area, but not to
the extent that the Law Reform Committee (LRC) recommended in 1957. We
provisionally propose a more limited reform, namely that an intermediary dealing
with a consumer should be regarded as acting for an insurer for the purposes of
obtaining pre-contract information, unless it is genuinely searching the market on
the insured’s behalf.
10.3 We then consider whether to overturn the rule in Newsholme, that an insured is
liable for any errors on a signed proposal introduced by an agent. We
provisionally propose that where an agent would otherwise be considered the
insurer’s agent, they should remain the insurer’s agent for the purpose of
completing a proposal form.
10.4 Finally we consider the effect of section 19 of the 1906 Act.
What is at stake?
Who should pursue the claim against the intermediary?
10.5 In many cases the question is not whether the consumer should have a remedy.
If the intermediary is at fault, the consumer will normally have a remedy against
the intermediary for professional negligence. The question is whether the
consumer should be obliged to pursue that remedy, or whether the insurer should
have to pay the claim and pursue their own remedy against the intermediary.
The effect of an intermediary’s status
10.6 In Part 4 we made proposals for reforming the law where a consumer has given
an inaccurate or incomplete answer to the insurer’s questions. We think it would
be helpful to set out how we see the issue of the intermediary’s status as
interacting with these proposals:
(1) If an independent intermediary is acting for the insured then the insured
bears responsibility for the fraud or negligence committed by their agent.
This means that:
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