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

In such circumstances, it was also recommended that the insurer should not be
entitled to pursue an alternative remedy for misrepresentation. 13
Proposal and renewal forms
A.25 The Commission recommended that proposal forms should contain clear, explicit
and prominent warnings about the standard of answers required, the duty to
volunteer information and the consequences of failing to meet these obligations. 14
A copy of the completed proposal form should be provided to a policyholder after
completion or as soon after as is reasonably practicable. 15
A.26 In the event of a failure to meet these requirements, an insurer would be unable
to rely on any non-disclosure by the policyholder — subject to the court having a
discretion to allow the insurer to rely on the non-disclosure if the failure caused
no prejudice to the policyholder.
A.27 The Commission further recommended that if a policy had been initiated by the
completion of a proposal form the insurer should only have a remedy for
non-disclosure at renewal if it had taken the following steps:
(1) Supplied the policyholder with copies of any information that the
policyholder had previously submitted to the insurer.
(2) Warned the policyholder of the importance of retaining such copies.
(3) Warned the policyholder of the duty to volunteer information and the
consequences of failing to meet this obligation.
A.28 For policies not initiated by proposal form, only the third step was required.
Anti-avoidance
A.29 The Commission recommended measures to prevent insurers from avoiding the
reforms.
A.30 First, it thought that where a policyholder's failure to provide an insurer with
information amounts to both a non-disclosure and a non-fraudulent
misrepresentation, an insurer's rights would be limited to those — if any —
available for non-disclosure. 16
A.31 Secondly, it recommended measures to curb the use of “basis of the contract”
clauses. 17 The Commission recommended that such clauses should be
ineffective insofar as they seek to create warranties as to past or present fact.
Rejected options
A.32 The English Law Commission specifically rejected two further options for reform.
13 As above, at paras 4.61 to 4.62 and 8.5.
14 As above, at para 10.14.
15 As above, at para 10.15.
16 As above, at para 8.5.
17 As above, at paras 7.8 to 7.11
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