Insurance Contracts CP - Law Reform Commission

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3.92 In the two subsequent reports the New Zealand Law Commission has sought to restrict the insurer‘s common law right to avoid a contract of non disclosure to cases where: the insurer seeks to avoid the contract within 10 working days of the risk attaching, giving an insurer time to inquire into facts, especially on provisional insurance matters; the contract is one of re-insurance; the non disclosure relates to a fact that the proposer either knew, or that, a reasonable person in the circumstances would have known would have influenced the judgment of a prudent insurer in fixing the premium or deciding to take the risk on substantially the same terms; the answer given to a question that was expressly asked is substantially incorrect, because of the non disclosure; In the case of a prospective avoidance, ie the insurer seeks to exercise the common law right before the risk materialises, such a common law right should not be affected. 3.93 The New Zealand Law Commission, in its 1998 Report examined the Australian reforms of 1984 but did not recommend that New Zealand law should be reformed along Australian lines, concluding that these provisions in Australia made the scope of the duty uncertain and that the proportionality remedies ―involve difficult assessments as to the insurers likely response had the insured disclosed the information.‖ 116 These New Zealand proposals were described in the 2004 Report as ―provisional measures‖, 117 pending a fuller review when the 2003 Australian Treasury Review of the 1984 Act was completed. 118 (12) The Principles of European Insurance Contract Law (PEICL) 3.94 The PEICL authors have set out a number of proposals that qualify the duty of disclosure and restrict the insurer‘s right to avoid the policy save in cases of fraudulent breach. The applicant‘s precontractual information duty, insofar as the provisions are relevant to this chapter are as follows: Article 2:101 Duty of Disclosure (1) When concluding the contract, the applicant shall inform the insurer of circumstances of which he is or ought to be aware, and which are the subject of clear and precise questions put to him by the insurer. (2) The circumstances referred to in para.1 include those of which the person to be insured was or should have been aware. (3) The insurer shall not be entitled to terminate the contract if the policyholder is in innocent breach of Article 2:101, unless the insurer proves that it would not have concluded the contract, had it known the information concerned. Article 2:102 sets out provisions governing breach of Article 2:101, specifically an insurer‘s right to propose a reasonable variation of the contract or elect to terminate the contract. Termination for innocent breach requires the insurer to prove that it would not have concluded the contract had it known the information concerned. Where the insured event occurs prior to variation or termination, and it is caused by an element of the risk that was the subject of negligent non-disclosure or misrepresentation by the policyholder, no insurance money is payable if the insurer would not have concluded that contract. Where the premium would have been adjusted however, a proportionality remedy will be available to the insurer. Article 2:102 is governed by Article 3:103: 116 117 118 Some Insurance Law Problems (NZLC R-46)(1988). The second report, from 2004 Life Insurance (NZLC R- 87)(2004) with text of a draft Bill appended. For the text of these proposals see Draft Bill, clauses 14 and 15. See the 1988 Report, para. 23; 2004 Report, para. 8.33. Paragraph 8.40 86
Article 3:103 Exceptions The sanctions provided for in Article 2:102 shall not apply in respect of (a) a question which was unanswered, or information supplied which was obviously incomplete or incorrect; (b) information which should have been disclosed or information inaccurately supplied, which was not material to a reasonable insurer‘s decision to enter into the contract at all, or to do so on the agreed terms; (c) information which the insurer led the policyholder to believe did not have to be disclosed; (d) information of which the insurer was or should have been aware. Article 2:104 Fraudulent Breach Without prejudice to the sanctions provided for in Article 2;102, the insurer shall be entitled to avoid the contract by the policyholder‘s fraudulent breach of Article 2:101. Notice of avoidance shall be given to the policyholder in writing within two months after the fraud becomes known to the insurer. (13) British Consumer Insurance (Disclosure and Representations) Bill 2011 3.95 In a series of documents, ranging from a 2007 Joint Consultation Paper to the Consumer Insurance (Disclosure and Representations) Bill, 119 the Law Commissions have sought to promote changes in relation to the duty of disclosure, misrepresentation and warranties. The 2007 Consultation Paper initially contained recommendations in respect of all three topics, addressing these problems in respect of consumer and business insurance. The 2009 Report and 2011 Bill however confined themselves to consumer insurance and misrepresentation. The difficulty in getting agreement on reforming commercial insurance appears to be the main reason for this revised approach. 3.96 In the sole context of consumer insurance the Law Commissions, 120 in their December 2009 Report and 2011 Bill, recommended that the section 17 duty of utmost good faith in consumer contracts, be replaced by a duty to take reasonable care not to make a misrepresentation. This duty should apply vis-a-vis disclosure and representations to the insurer by the consumer proposer. This amends both section 17 and any common law rule but does not supplant any post formation duty of utmost good faith that the consumer may be under (save in cases of variation of an insurance contract). 3.97 The Consumer Insurance (Disclosure and Representations) Bill 2011, introduced into the House of Lords by the UK Government in 2011, is the first legislative proposal to emerge from the deliberations of various law reform agencies in Britain dating back to the 1957 Report. This Bill is seen as being non-controversial and the Law Commissions are of the view that, in the words of Law Commissioner David Hertzell: ―The introduction of this Bill is a significant achievement. This is the first time that consumer groups and the insurance industry have reached a consensus on this issue.‖ 121 3.98 Clause 1 of the 2011 Bill confines the reforms to consumers who enter or propose to enter a consumer insurance contract, defined as a contract of insurance between a person who carries on the 119 120 121 Joint Consultation Paper, Insurance Contract Law: Misrepresentation, Non-Disclosure and Breach of Warranty by the Insured (Consultation Paper No 182); Consumer Insurance Law: Pre-contract Disclosure and Misrepresentation (Law Com No 319); Consumer Insurance (Disclosure and Representations) Bill 2011 (HL Bill 68). Law Com No 319. May 17 2011 Press Release. 87
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CONSULTATION PAPER INSURANCE CONTRA
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MEMBERSHIP The Law Reform Commissio
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ADMINISTRATION STAFF Head of Admini
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ACKNOWLEDGEMENTS The Commission wou
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TABLE OF CONTENTS Table of Key Legi
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CHAPTER 4 (3) Factors covered by an
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(10)Enforcement 149 CHAPTER 7 FORMA
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TABLE OF KEY LEGISLATION Assurance
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Pg No. Economides v Commercial Unio
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Ireland Ltd Pg No. Roselodge Ltd v
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D Regulation and Supervision of Ins
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has been the Consumer Protection Co
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this definition would apply both to
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Commission provisionally recommends
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2005 Final Report and Recommendatio
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in Coleman accords with data protec
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functions may in the future be merg
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estrictions on the ability of the O
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(2) Adverse comments on the propose
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harmonisation of insurance contract
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1.49 Before leaving the general iss
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(2) Decisions of the Financial Serv
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uberrima fidei, regulatory requirem
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1.68 The Commission provisionally r
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2.03 In contrast, a non-indemnity
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CJ expressed the view that it made
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2.18 In the House of Lords, Lord El
Page 56 and 57: Lord Eldon formulation, 45 overrule
Page 58 and 59: interest in respect of the property
Page 60 and 61: drawings themselves, Auld LJ and Si
Page 62 and 63: the judges to complicate the law by
Page 64 and 65: Insurance in the UK, Ireland and EU
Page 66 and 67: any existing doubt, or prevailing m
Page 68 and 69: (2) A potential financial loss reco
Page 70 and 71: to the extent of monies actually ex
Page 72 and 73: took out a life insurance policy on
Page 74 and 75: 2.86 The Commission invites submiss
Page 76 and 77: and social provision be integrated
Page 78 and 79: and deny enforceability. The leadin
Page 80 and 81: (6) Defining Insurance Contracts in
Page 83 and 84: 3 CHAPTER 3 DUTY OF DISCLOSURE A In
Page 85 and 86: the Ohio case of Hartford Protectio
Page 87 and 88: the basis that the insurance contra
Page 89 and 90: that which the signatory could reas
Page 91 and 92: ―(i) In order to be entitled to a
Page 93 and 94: withholding information on the basi
Page 95 and 96: public interest in running blockade
Page 97 and 98: In Manor Park, McMahon J. took a si
Page 99 and 100: at the precontractual stage. The de
Page 101 and 102: decisions in which the Ombudsman ha
Page 103 and 104: (8) The English Law Commission’s
Page 105: (10) Australia 3.88 In ALRC Report
Page 109: it is desirable to retain the duty;
Page 112 and 113: B Judicial approaches to limiting a
Page 114 and 115: will no doubt arise in the future.
Page 116 and 117: questions that are incapable of a y
Page 118 and 119: (1) Marine Insurance Act 1906 and m
Page 120 and 121: (3) Should the right to rescind be
Page 122 and 123: y English judges to any extent, and
Page 124 and 125: non-disclosure or misrepresentation
Page 126 and 127: Factually incorrect answers to a qu
Page 128 and 129: 4.68 While the English and Scottish
Page 130 and 131: terms to be construed by reference
Page 132 and 133: conclusion, ―with considerable re
Page 134 and 135: the present was held not to be prom
Page 136 and 137: (10) Limiting the scope of the warr
Page 138 and 139: have been forthright in suggesting
Page 140 and 141: nature and potentially draconian na
Page 142 and 143: (b) that even though the loss was o
Page 144 and 145: whichever is the earlier event. 103
Page 146 and 147: 5.67 Nevertheless, the law reports
Page 148 and 149: may properly consider to be relevan
Page 150 and 151: ―It is easy to sympathise with th
Page 152 and 153: decisions, and case-law, that preve
Page 154 and 155: the terms of the insurance contract
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householder each assuming the other
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whether in all the circumstances it
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may be regarded as technical or unm
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―Basis of contract clauses would
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The court may be influenced by the
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―consumer‘s reasonable expectat
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of the term, particularly in the co
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National Consumer Agency would be t
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premium, thus taking the contract o
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the Provider could not provide the
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exceptions to these requirements in
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(l) the existence of guarantee fund
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policy should be issued within fift
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contains interesting and helpful ad
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in the Aro Road case who wrote that
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8.11 The most visible demonstration
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common law position relating to sep
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F Effects of fraud 8.27 Once the fr
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8.36 In the case of composite insur
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(i) consented to the act or omissio
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Insurance Corporation of the Channe
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not only an economic purpose, but a
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Article 6:104 Time of Performance (
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B The Problem in Context 9.04 The d
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D Exceptions to the Privity Rule (1
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9.20 Because Ireland has not adopte
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cover but the defendants failed to
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(1) ―Where a person who is not pa
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9.46 The privity doctrine confines
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CHAPTER 10 REMEDIES A Introduction
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(4) Where the risk would have been
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isks‖ policy provided by Royal an
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elation to negligent misrepresentat
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insurer is seeking to avoid the con
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10.38 The decision of Hirst J in Th
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10.48 The Ontario Court of Appeal,
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(a) An insurer cancelled a motor in
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G Subrogation - Public Policy Excep
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(ii) Subrogation - Employee Liabili
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Employee‟s Liability (Indemnifica
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―an employer should be liable to
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Street Dublin against the embezzlem
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11.09 The Commission invites submis
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of a promissory warranty, it should
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Insurance Contracts CP - Law Reform Commission

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