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

GENERAL INSURANCE STANDARDS COUNCIL
A.51 In July 2000, a voluntary regulator was established for general insurance.
Membership was open to insurers and intermediaries. Regulation was based on
two codes - the GISC Private Customer Code for consumer insurances and the
GISC Commercial Code for business insurances.
THE PAT SAXTON MEMORIAL LECTURE 2001
A.52 In March 2001 Lord Justice Longmore gave the Pat Saxton Memorial Lecture. He
took the opportunity to propose a new Insurance Contracts Act, dealing with,
amongst other issues, misrepresentation and non-disclosure. He made a number
of suggestions for reform.
Test of materiality
A.53 Lord Justice Longmore identified a number of possible formulations for the test of
materiality, and expressed support for a formulation that depends on what the
reasonable insured would think was material. He has since said judicially:
Remedies
Is it not time that the law was changed at least to the extent that an
insured’s disclosure obligation should be to disclose matters which
the insured knows are relevant to the insurer’s decision to accept the
risk or which a reasonable assured could be expected to know are
relevant to that decision? 21
A.54 He suggested that the courts might be given a discretion to adjust the respective
responsibilities of insured and insurer instead of allowing avoidance:
It would, of course, lead to some uncertainty but that, after all, was a
reason against the introduction of the concept of contributory
negligence which, in the event, is a concept that has worn the test of
time very well. In these days when the incidence of costs in litigation
may depend on well or ill informed guesses made by the litigant, at
the time they are obliged to serve pre action protocols, uncertainty is
endemic, yet the court, and litigants, are quite good at getting used to
it. Moreover, the Insurance Ombudsman Bureau apparently uses its
discretion on occasion to apportion the loss and appears to have no
difficulty with the concept.
THE FINANCIAL SERVICES AND MARKETS ACT 2000
COB
A.55 One of the earliest acts of the Labour government formed in May 1997 was an
announcement that it intended to introduce statutory regulation for the financial
services industry with a single regulator – the Financial Services Authority
(“FSA”). This new system was introduced in 2001 under the Financial Services
and Markets Act 2000 ("FiSMA").
21
North Star Shipping Ltd v Sphere Drake Insurance plc [2006] EWCA Civ 378, [2006] 2
Lloyd’s Rep 183, at [53].
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