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

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APPENDIX B ASSESSING THE ECONOMIC IMPACT OF OUR PROPOSALS: A REPORT PREPARED BY LONDON ECONOMICS A proposed model for assessing the economic impact of proposed changes to the law relating to non-disclosure and misrepresentation Prepared by London Economics, June 2007 The following report contains its own contents list and pagination. The main pagination of the report resumes at page 359 with Appendix C. 298
A proposed model for assessing the economic impact of proposed changes to the law relating to non-disclosure and misrepresentation Final report on behalf of the Law Commission and the Scottish Law Commission Prepared by London Economics June 2007 © Copyright London Economics. No part of this document may be used or reproduced without London Economics’ express permission in writing.
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The Law Commission Consultation Pap
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THE LAW COMMISSION THE SCOTTISH LAW
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v Paragraph Page Innocent misrepres
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vii Paragraph Page Marine Insurance
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OUTLINE 1.1 This Consultation Paper
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• At present, consumers have a du
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• Any warranty should be set out
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PART 1 INTRODUCTION OUTLINE OF THE
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1.11 The 1906 Act therefore imposes
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(1) The insurer may use warranties
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1.17 When in 1980 the English Law C
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1.28 For most consumers with disput
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“Fairness” and reasonable expec
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1.50 The parties should be free to
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“Moral hazard” and the need for
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1.71 We think that consumers would
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1.80 We ask what the appropriate re
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(2) Appendix B is a report commissi
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Although the issues arise under a p
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Thus if, when a claim is made, the
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2.21 In both jurisdictions the vict
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(2) Before an insurer may avoid a c
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Subject to the provisions of this s
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Despite some contrary suggestions,
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Held covered in case of any breach
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(2) The warranty is relevant to onl
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2.61 Classification of the term is
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2.68 Such clauses elevate the answe
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These are often referred to as “c
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2.82 We accept that an exception to
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(d) readily available to any person
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2.101 If the term were not sufficie
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2.111 The law on warranties is simi
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(1) Each proposal form was required
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3.14 TCF is a valuable initiative w
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THE FINANCIAL OMBUDSMAN SERVICE 3.2
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Research project 3.32 When we start
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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
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The risk of legal challenge 3.72 We
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(3) BOTH HONESTLY AND CAREFULLY (OR
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4.10 Some consultees have asked how
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4.18 The FOS’s requirement that t
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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
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Different ways in which policyholde
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Judging what is “reasonable” fo
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4.121 We ask whether the legislatio
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...the reasonable expectation of th
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4.142 The proposer should take care
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4.154 Few of the legal systems that
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4.162 We accept the first argument
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No reinsurance 4.173 It may occasio
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Effect on future cover 4.183 The fo
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Reactions 4.195 This question excit
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4.206 In Part 3 we identified one p
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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
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Thus if a business insured ought to
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5.46 On the one hand, it seems righ
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5.57 Insurance law is currently har
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5.67 This is the same rule that we
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5.76 We were told, for example, abo
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5.86 We have already set out our pr
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Proving that an action was delibera
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Cancelling for the future 5.105 We
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(1) The law could allow statements
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5.124 Is one approach better than t
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Controlling the use of standard ter
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However, the provenance of the term
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Reinsurance 5.153 Our starting poin
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5.163 It is important to bear in mi
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5.170 The same issues arise here. A
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PART 6 GROUP INSURANCE, CO-INSURANC
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6.9 There may, however, be cases wh
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6.18 We were told that whatever the
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6.31 There is one question on which
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(1) Where a member has made a delib
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The FOS approach 6.48 In our survey
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6.59 In Part 4 we provisionally pro
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6.73 In business contracts, we prop
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(3) The policy may contain exceptio
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Statements of Insurance Practice 7.
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TREATING CUSTOMERS FAIRLY 7.22 In P
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7.31 Case 14 concerned a critical i
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7.40 Insurers have told us that the
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7.50 Large businesses are more able
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Civil law jurisdictions 7.61 The no
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PART 8 WARRANTIES AS TO THE FUTURE
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8.24 Although our general policy is
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8.33 It may be helpful to illustrat
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8.41 We have considered whether the
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8.51 For business insurance it is a
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8.62 These provisions require the c
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(1) The protection only applies to
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…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
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The implied marine warranties 8.116
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Implied voyage conditions 8.127 The
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PART 9 PRE-CONTRACT INFORMATION AND
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9.6 The issue is far from new. Repo
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THE CURRENT LAW Introduction 9.16 R
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The broker as agent for the insured
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There must be every day thousands o
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(1) on the basis of a fair analysis
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9.47 The problem is particularly ac
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Transcribing information to screen
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9.61 However, the case law suggests
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However, it is not obvious that thi
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Section 19(b) 9.77 We have not rece
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It seems to me, both from a reading
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CONSUMERS - THE CURRENT POSITION In
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9.101 For these types of activity,
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(3) whether the firm has or will pr
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9.118 This was the view taken by a
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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: In order to allow flexibility and t
Page 315 and 316: Tables & Figures Page Table 1: Illu
Page 317 and 318: Section 1 Introduction and Terms of
Page 319 and 320: Section 2 What are the primary chan
Page 321 and 322: Section 3 Economic incentives in in
Page 329 and 330: Section 4 Baseline analysis of insu
Page 345 and 346: Section 5 Identification of the pot
Page 353 and 354: Section 6 Case Study - Critical Ill
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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
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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
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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
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When does the FOS apply the consume
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The overall success rate C.107 The
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Institute of Actuaries Healthcare C
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