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

1.80 We ask what the appropriate remedy should be if a business insured was honest
in giving pre-contract information, but less careful than they should have been.
The question is whether the law should aim to put the insurer back into the
position it would have been in had the correct information been given, or whether
the law should go further and entitle the insurer to reject all claims under the
policy.
1.81 The parties should be free to agree other terms if they wish, but this should be
subject to a proviso. Where the parties contract on the insurer’s standard terms,
the clause changing the default rules must not defeat the insured’s reasonable
expectations.
1.82 These changes would bring the law into line with good market practice, promote
fairer competition and increase confidence in the UK market.
EUROPE
1.83 There is a further reason to review the United Kingdom’s insurance contract law.
This is the possibility that the European Community will take steps to harmonise
the law across Europe, or possibly to create a European law of insurance
contracts.
1.84 There are European initiatives that may eventually have some influence on
insurance contract law. 34 In particular, work is being conducted by the
Restatement of European Insurance Contract Law Project Group (“the Innsbruck
Group”), 35 which is drafting the rules for the Common Frame of Reference on
Insurance Contract Law. These rules could perhaps form the basis for a
European Directive. Alternatively, they may possibly be used as a “28th regime” 36
optional contract law instrument, which the parties could chose as an alternative
to the law of a specific jurisdiction. 37 Thus a German firm seeking insurance in
London for its offices in the Baltic states might prefer to specify the “28th regime”
as the applicable law rather than writing the policy under German, English or
Lithuanian law.
34 See the Opinion of the European Economic and Social Committee on “The European
Insurance Contract” adopted on 15 December 2004.
35 http://www.restatement.info/ (last visited 1 May 2007).
36
This phrase, commonly used in Brussels, seems to ignore the fact that the UK has two
quite distinct laws of contract.
37 See J Basedow, “The Case for a European Insurance Contract Code” [2001] JBL 569; J
Basedow, “Insurance contract law as part of an optional European Contract Act” [2003]
LMCLQ 498; M Clarke and Heiss, “Towards a European Insurance Contract Law? Recent
developments in Brussels 2” [2006] JBL 600.
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