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

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The Law Commission and the Scottish Law Commission were set up by section 1 of the Law Commissions Act 1965 for the purpose of promoting the reform of the law. At the time this joint consultation paper was prepared, the Law Commissioners were: The Honourable Mr Justice Etherton, Chairman Professor Hugh Beale QC, FBA Mr Stuart Bridge Professor Jeremy Horder Kenneth Parker QC Professor Hugh Beale’s term of office came to an end on 30 June 2007. He has been succeeded by Mr David Hertzell. The Chief Executive of the Law Commission is Steve Humphreys and its offices are at Conquest House, 37-38 John Street, Theobalds Road, London WC1N 2BQ. The Scottish Law Commissioners are: The Honourable Lord Drummond Young, Chairman Professor George L Gretton Professor Gerard Maher QC Professor Joseph M Thomson Colin J Tyre QC The Chief Executive of the Scottish Law Commission is Michael Lugton and its offices are at 140 Causewayside, Edinburgh EH9 1PR. This joint consultation paper, completed on 21 June 2007, is circulated for comment and criticism only. It does not represent the final views of the two Law Commissions. We would be grateful for comments on the proposals before 16 November 2007. Please send comments to the Law Commission either – By email to: commercialandcommon@lawcommission.gsi.gov.uk; or By post to: Elizabeth Waller, Law Commission, Conquest House, 37-38 John Street Theobalds Road, London WC1N 2BQ Tel: 020-7453-1231 / Fax: 020-7453-1297 It would be helpful if, where possible, comments sent by post could also be sent on disk, or by email to the above address, in any commonly used format. As the Law Commission will be the recipient of responses, the Freedom of Information Act 2000 will apply and all responses will be treated as public documents. Those who wish to submit a confidential response should contact the Law Commission before sending the response. Automatic confidentiality disclaimers generated by an IT system will be disregarded. This consultation paper is available free of charge at: http://www.lawcom.gov.uk/insurance_contract.htm and http://www.scotlawcom.gov.uk/html/cpinsurance.htm
THE LAW COMMISSION THE SCOTTISH LAW COMMISSION INSURANCE CONTRACT LAW: MISREPRESENTATION, NON-DISCLOSURE AND BREACH OF WARRANTY BY THE INSURED CONTENTS iii Paragraph Page Outline ix-xiii Glossary xiv BACKGROUND PART I: INTRODUCTION 1 Outline of the project 1.1 1 Problems with the law 1.7 2 Previous criticisms of the law 1.16 6 Developments affecting consumers 1.20 7 Criteria for evaluating the law 1.38 10 Consumer insurance: enshrining existing principles of good practice into law 1.74 17 Business insurance: setting out default rules that meet reasonable expectations 1.78 18 Europe 1.83 19 Structure of the paper 1.86 20 Acknowledgements 1.92 21
Page 1: The Law Commission Consultation Pap
Page 5 and 6: v Paragraph Page Innocent misrepres
Page 7 and 8: vii Paragraph Page Marine Insurance
Page 9 and 10: OUTLINE 1.1 This Consultation Paper
Page 11 and 12: • At present, consumers have a du
Page 13 and 14: • Any warranty should be set out
Page 15 and 16: PART 1 INTRODUCTION OUTLINE OF THE
Page 17 and 18: 1.11 The 1906 Act therefore imposes
Page 19 and 20: (1) The insurer may use warranties
Page 21 and 22: 1.17 When in 1980 the English Law C
Page 23 and 24: 1.28 For most consumers with disput
Page 25 and 26: “Fairness” and reasonable expec
Page 27 and 28: 1.50 The parties should be free to
Page 29 and 30: “Moral hazard” and the need for
Page 31 and 32: 1.71 We think that consumers would
Page 33 and 34: 1.80 We ask what the appropriate re
Page 35 and 36: (2) Appendix B is a report commissi
Page 37 and 38: Although the issues arise under a p
Page 39 and 40: Thus if, when a claim is made, the
Page 41 and 42: 2.21 In both jurisdictions the vict
Page 43 and 44: (2) Before an insurer may avoid a c
Page 45 and 46: Subject to the provisions of this s
Page 47 and 48: Despite some contrary suggestions,
Page 49 and 50: Held covered in case of any breach
Page 51 and 52: (2) The warranty is relevant to onl
Page 53 and 54:
2.61 Classification of the term is
Page 55 and 56:
2.68 Such clauses elevate the answe
Page 57 and 58:
These are often referred to as “c
Page 59 and 60:
2.82 We accept that an exception to
Page 61 and 62:
(d) readily available to any person
Page 63 and 64:
2.101 If the term were not sufficie
Page 65 and 66:
2.111 The law on warranties is simi
Page 67 and 68:
(1) Each proposal form was required
Page 69 and 70:
3.14 TCF is a valuable initiative w
Page 71 and 72:
THE FINANCIAL OMBUDSMAN SERVICE 3.2
Page 73 and 74:
Research project 3.32 When we start
Page 75 and 76:
Case study: clear questions should
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3.43 These examples look only at th
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Warranties of fact 3.50 We did not
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(9) The FOS has more experience tha
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3.63 There might of course be some
Page 85 and 86:
The risk of legal challenge 3.72 We
Page 87 and 88:
(3) BOTH HONESTLY AND CAREFULLY (OR
Page 89 and 90:
4.10 Some consultees have asked how
Page 91 and 92:
4.18 The FOS’s requirement that t
Page 93 and 94:
General questions 4.21 As we have s
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4.32 We provisionally propose that
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4.43 We would also point out that a
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Criminal fraud 4.55 First, some ins
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4.62 We stress this point, because
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4.70 The issue is further confused
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Relevance 4.80 Secondly, our defini
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4.92 However, we are not sure that
Page 109 and 110:
Different ways in which policyholde
Page 111 and 112:
Judging what is “reasonable” fo
Page 113 and 114:
4.121 We ask whether the legislatio
Page 115 and 116:
...the reasonable expectation of th
Page 117 and 118:
4.142 The proposer should take care
Page 119 and 120:
4.154 Few of the legal systems that
Page 121 and 122:
4.162 We accept the first argument
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No reinsurance 4.173 It may occasio
Page 125 and 126:
Effect on future cover 4.183 The fo
Page 127 and 128:
Reactions 4.195 This question excit
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4.206 In Part 3 we identified one p
Page 131 and 132:
Page 133 and 134:
Our proposals 4.228 Therefore we pr
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5.5 We have therefore sought soluti
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(2) Similar protections would apply
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(1) The duty of disclosure has beco
Page 141 and 142:
Thus if a business insured ought to
Page 143 and 144:
5.46 On the one hand, it seems righ
Page 145 and 146:
5.57 Insurance law is currently har
Page 147 and 148:
5.67 This is the same rule that we
Page 149 and 150:
5.76 We were told, for example, abo
Page 151 and 152:
5.86 We have already set out our pr
Page 153 and 154:
Proving that an action was delibera
Page 155 and 156:
Cancelling for the future 5.105 We
Page 157 and 158:
(1) The law could allow statements
Page 159 and 160:
5.124 Is one approach better than t
Page 161 and 162:
Controlling the use of standard ter
Page 163 and 164:
However, the provenance of the term
Page 165 and 166:
Reinsurance 5.153 Our starting poin
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5.163 It is important to bear in mi
Page 169 and 170:
5.170 The same issues arise here. A
Page 171 and 172:
PART 6 GROUP INSURANCE, CO-INSURANC
Page 173 and 174:
6.9 There may, however, be cases wh
Page 175 and 176:
6.18 We were told that whatever the
Page 177 and 178:
6.31 There is one question on which
Page 179 and 180:
(1) Where a member has made a delib
Page 181 and 182:
The FOS approach 6.48 In our survey
Page 183 and 184:
6.59 In Part 4 we provisionally pro
Page 185 and 186:
6.73 In business contracts, we prop
Page 187 and 188:
(3) The policy may contain exceptio
Page 189 and 190:
Statements of Insurance Practice 7.
Page 191 and 192:
TREATING CUSTOMERS FAIRLY 7.22 In P
Page 193 and 194:
7.31 Case 14 concerned a critical i
Page 195 and 196:
7.40 Insurers have told us that the
Page 197 and 198:
7.50 Large businesses are more able
Page 199 and 200:
Civil law jurisdictions 7.61 The no
Page 201 and 202:
PART 8 WARRANTIES AS TO THE FUTURE
Page 203 and 204:
Page 205 and 206:
8.24 Although our general policy is
Page 207 and 208:
8.33 It may be helpful to illustrat
Page 209 and 210:
8.41 We have considered whether the
Page 211 and 212:
8.51 For business insurance it is a
Page 213 and 214:
8.62 These provisions require the c
Page 215 and 216:
(1) The protection only applies to
Page 217 and 218:
…subject to any express provision
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8.92 This means that neither the in
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Waiver and affirmation 8.101 The ch
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8.107 Scots law has not developed a
Page 225 and 226:
The implied marine warranties 8.116
Page 227 and 228:
Implied voyage conditions 8.127 The
Page 229 and 230:
PART 9 PRE-CONTRACT INFORMATION AND
Page 231 and 232:
9.6 The issue is far from new. Repo
Page 233 and 234:
THE CURRENT LAW Introduction 9.16 R
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The broker as agent for the insured
Page 237 and 238:
There must be every day thousands o
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(1) on the basis of a fair analysis
Page 241 and 242:
9.47 The problem is particularly ac
Page 243 and 244:
Transcribing information to screen
Page 245 and 246:
9.61 However, the case law suggests
Page 247 and 248:
However, it is not obvious that thi
Page 249 and 250:
Section 19(b) 9.77 We have not rece
Page 251 and 252:
It seems to me, both from a reading
Page 253 and 254:
CONSUMERS - THE CURRENT POSITION In
Page 255 and 256:
9.101 For these types of activity,
Page 257 and 258:
(3) whether the firm has or will pr
Page 259 and 260:
9.118 This was the view taken by a
Page 261 and 262:
Unfortunately, the firm has contemp
Page 263 and 264:
PART 10 PRE-CONTRACT INFORMATION AN
Page 265 and 266:
10.9 Some intermediaries fall outsi
Page 267 and 268:
10.19 We think this is a less attra
Page 269 and 270:
10.25 Insurers may find it more dif
Page 271 and 272:
Completion of proposal forms: the N
Page 273 and 274:
Marine Insurance Act 1906, section
Page 275 and 276:
10.56 The great majority of busines
Page 277 and 278:
10.70 We welcome views on whether p
Page 279 and 280:
Cases brought to the Financial Ombu
Page 281 and 282:
11.18 When we commissioned this mod
Page 283 and 284:
The overall effect 11.27 The model
Page 285 and 286:
11.39 Unlike our other proposals, t
Page 287 and 288:
12.9 Do consultees agree that the d
Page 289 and 290:
12.22 We provisionally reject the p
Page 291 and 292:
Contracting out of the default regi
Page 293 and 294:
Consumer insurance: “joint lives,
Page 295 and 296:
12.68 If the voyage conditions are
Page 297 and 298:
ASSESSING THE COSTS AND BENEFITS OF
Page 299 and 300:
THE STATEMENTS OF PRACTICE 1977 A.4
Page 301 and 302:
Voluntary measures unsatisfactory A
Page 303 and 304:
In such circumstances, it was also
Page 305 and 306:
A.39 In 1984 the DTI put forward a
Page 307 and 308:
GENERAL INSURANCE STANDARDS COUNCIL
Page 309 and 310:
A.63 This report is of particular i
Page 311 and 312:
In order to allow flexibility and t
Page 313 and 314:
A proposed model for assessing the
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Tables & Figures Page Table 1: Illu
Page 317 and 318:
Section 1 Introduction and Terms of
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Section 2 What are the primary chan
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Section 3 Economic incentives in in
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Page 325 and 326:
Page 327 and 328:
Page 329 and 330:
Section 4 Baseline analysis of insu
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Page 341 and 342:
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Page 345 and 346:
Section 5 Identification of the pot
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Section 6 Case Study - Critical Ill
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Annex 1 References Cockburn, B. (20
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APPENDIX C THE FOS APPROACH TO ISSU
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Table 2: Consumer cases: main infor
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Table 4: Consumer cases: time of no
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C.27 The FOS has explained that in
Page 381 and 382:
Have you any physical defect or inf
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The FOS approach to unclear questio
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Deliberate Customers deliberately m
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C.65 A further complication of the
Page 389 and 390:
I cannot accept that the complainan
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(2) W failed to disclose an eating
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C.89 One problem with relying on om
Page 395 and 396:
When does the FOS apply the consume
Page 397 and 398:
The overall success rate C.107 The
Page 399 and 400:
Institute of Actuaries Healthcare C
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Misrepresentation, Non-Disclosure and Breach ... - Law Commission

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