Insurance Contracts CP - Law Reform Commission

usiness of insurance (with or without the necessary legislative permissions) and ―an individual who
enters into the contract wholly or mainly for purposes unrelated to the individual‘s trade, business or
profession.‖
3.99 In relation to the duty of disclosure, clause 2(4) provides that the duty set in clause 2(2) of the
Bill ―replaces any duty relating to disclosure or representations by a consumer to an insurer which existed
in the same circumstances before this Act applied.‖ The clause 2(2) duty is ―the duty of the consumer to
take reasonable care not to make a misrepresentation to the insurer.‖ Clause 2(5) modifies any rule of
law stating that a consumer insurance contract is one of the utmost good faith, to the extent required by
the Bill and renders section 17 of the Marine Insurance Act 1906 subject to the provisions of the Bill
insofar as it is a consumer insurance contract. Clause 11(1)(a) of the Bill completes the process of
closing off non-disclosure which does not involve a misrepresentation by the consumer proposer by
providing that any rule of law having the same effect as section 18 of the Marine Insurance Act 1906 is
abolished. Section 18 of the 1906 Act is also rendered inapplicable to contracts of marine insurance
which are consumer insurance contracts, this being achieved via clause 11(2), adding a new subsection
(6) to section 18 of the 1906 Act.
F
General Conclusions
3.100 The net effect of the reforms in the 2011 Bill will be to remove any duty that the proposer was
generally under to disclose material facts even if unprompted by a question. It is not so clear however
whether the insurer may ask questions that may, through the back door, reinstate a right of avoidance by
inducing the proposer to make a material misrepresentation. The Commission considers that this danger
becomes evident when one considers the background to the 2011 Bill. Although the Law Commissions,
in the December 2009 Report and draft Bill recommend the abolition of the duty of disclosure – more
specifically a consumer‘s duty to volunteer information – it is suggested that, because the Law
Commissions recommended that insurers would be entitled to ask general questions as well as
detailed/precise ones, a general question in a proposal form might render the abolition of the duty to
volunteer information ineffective. The Law Commissions wrote in December 2009:
―To take an example raised by a broker in their response: a buildings policy proposal might ask
―are there any other hazards we should know about?‖ We think that a consumer who makes
fireworks at home would be required to mention this fact. This hazard is so obvious and
extreme that it is the sort of thing that a reasonable consumer would mention. However, it may
not be reasonable to expect consumers to state that they lived near rivers: if insurers want
information to assess flood risk, they should ask for it.‖ 122
3.101 The Commission‘s view is that if the hazard is ―so obvious and extreme‖ then a recalibrated
duty of disclosure, requiring a proposer to volunteer special facts highly relevant to the risk, should remain
in place. Such a horizontal duty, applying to both consumer and business proposers seeking standard,
mass market insurance products, would keep the law relatively simple and indeed avoid introducing
additional complexities into the law such as whether or not a general question was included in the
proposal form. In the case of the Battle of the Boyne Cottage dispute, the cottage displaying the mural
depicting the 1690 Battle of the Boyne had been a tourist attraction for most of the 25 years that preceded
the opening of the official visitor centre that probably precipitated the arson attack on Frank Godfrey‘s
property. Such facts could raise similar issues to the hypothetical fireworks enthusiast mentioned by the
Law Commissions above and it may also add the complication of a business or dual use activity question,
thus raising issues of classification across boundaries such as consumer/non consumer insurance and
consumer/small business insurance. The Commission would prefer to retain a duty of disclosure, in a
significantly redacted form, with bilateral pre-contractual duties to take reasonable care in transferring and
processing information, which, after all, are at the core of the utmost good faith principle.
3.102 In conclusion, and subject to the provisional recommendations for reform already made, the
Commission considers it is useful to set out here why, in general terms, the duty of disclosure should be
retained:
122
Law Com No 319, para 5.34.
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