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

10.50 This question may of course be academic, since we have been unable to find an
insurer who has relied on section 19(a) in a consumer case. If such cases exist,
we should be interested to receive details.
10.51 We ask whether section 19(a) of the Marine Insurance Act 1906 should
cease to apply in consumer cases, so that the agent to insure would have
no duty to disclose matters other than those which the consumer is bound
to disclose in response to the questions asked by the insurer.
10.52 If there are reasons to preserve an extended duty under section 19(a):
(1) Should the remedy lie in damages against the intermediary, rather
than in avoidance against the insured?
(2) Should any information given in confidence by a third party be
excepted from the scope of the duty?
(3) Should the duty be curtailed to information received in the course
of the relevant transaction?
BUSINESS INSURANCE
The status of the intermediary: whose agent?
10.53 Above we provisionally proposed that an intermediary dealing with a consumer
should be regarded as the insurer’s agent for the purposes of obtaining precontract
information, unless the intermediary is genuinely searching the market
on the insured’s behalf.
10.54 In a business context, it is relatively rare for insurance to be sold through agents
who deal with only one or a limited number of insurers. It may occur, but we have
been told these types of agent deal only with small to medium businesses. We
think that in these circumstances, the proposals we made for the consumer
market should apply to businesses. Small businesses may be in as much need of
protection as consumers, and the insurer will normally be in a better position to
exercise control than the insured. Thus where a business buys insurance through
an intermediary who does not genuinely search the market on the insured’s
behalf, we think that the intermediary should be considered to act for the insurer.
10.55 In Issues Paper 3 we suggested that this rule should only apply where the
insured was a small business. However, this leads to problems of definition.
There is no easy way of distinguishing between businesses in need of protection
and those that are not. It would also mean that an intermediary would be taken to
be acting for the insurer one day and for the insured next, when it sells an
identical policy to another business, which happens to be just over the threshold
limit. We are told that policies sold through intermediaries dealing with only one
or a limited number of insurers are usually standard products, sold to relatively
unsophisticated businesses. It is therefore easier to distinguish this sector by the
nature of the intermediary rather than by the nature of the insured.
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