Insurance Contracts CP - Law Reform Commission

B
Judicial approaches to limiting actionable misrepresentation
4.03 There are a number of ways in which the courts have sought to limit the law relating to
actionable misrepresentation.
(1) “Reading down” the statement
4.04 Statements that are laudatory, imprecise or bombastic might be held to be non actionable
―puffs‖. 4 Statements of opinion or belief about a state of facts will only be misrepresentations if the
opinion or belief is not actually held. 5 If the opinion or belief is held, the fact that it may not be the opinion
or belief that a prudent or well informed person would hold is not sufficient to make the resulting
statement as to opinion or belief a misrepresentation.
(2) Honest belief
4.05 In Economides v Commercial Union Insurance Ltd 6 the owner of a flat relied upon his father‘s
views as to the value of the contents of the flat when obtaining contents insurance. The replacement
value of the contents considerably exceeded the declared amount (£30,000 as against the £16,000
declared value). The Court of Appeal held that the proposer had an honest belief and reliance upon his
father‘s assessment provided a satisfactory basis for the opinion. Simon Brown LJ pithily observed that
―what the appellant‘s father told him here was a sufficient basis for his representation: he was under a
duty of honesty, not a duty of care‖. 7 However, a statement made on the basis of a pure guess or without
any foundation could well be a fraudulent misrepresentation, and a statement made while ignoring related
facts – ―Nelsonian blindness‖ – will preclude a successful plea of honest belief. 8
4.06 Where the proposer is not however a lay insured then greater knowledge and a higher duty –
one approaching a duty of care – may be expected: Sirius International Insurance Corp v Oriental
Insurance Corp. 9
(3) Agent liability
4.07 For present purposes it is sufficient to state that Irish case-law 10 clearly allows the insurer to
avoid the policy on the basis of a proposer‘s agent‘s misrepresentation:
―The agent owes his client a duty to take reasonable skill and care in assisting him to complete
a proposal form where that is required. If the agent himself fills in the form he must be careful
to check with the proposer that the answers are correct. The fact that the proposer should
check the answers before signing the proposal form does not necessarily relieve the agent of
responsibility for misstatements due to his negligence‖ 11
(4) Ambiguous questions
4.08 The issue of how ambiguous or misleading questions are to be treated by the proposer 12 has
been examined by the Irish judiciary on a number of occasions. While ambiguity may arise in relation to
4
5
6
7
8
9
10
11
12
Smith v Lynn (1954) 8 ILTR 57.
As section 20(5) of the 1906 Act requires statements of opinion to be true but provides a statement will be
deemed to be true if it is honestly held, issues of fraud via recklessness arise as in McAleenan v AIG (Europe)
Ltd [2010] IEHC 128.
[1998] QB 587.
Ibid. See also Zeller v British Caymanian Insurance Co Ltd [2008] UKPC 4.
See Vincent, Nelson (New Haven), p. 424 on Nelson‘s use of a telescope against his blind eye at the Battle of
Copenhagen. On statements of fact and belief generally see Bennett, (1998) 61 MLR 886.
[1999] 1 All ER (Comm) 699; McAleenan v AIG Europe Ltd [2010] IEHC 128.
Chariot Inns v Assicurazioni Generali SPA [1981] IR 199.
For harsh results of this rule see Connors v London and Provincial Assurance Co (1913) 47 ILTR 148. See
however section 51 of the Insurance Act 1989.
MacGillivray on Insurance Law, 11th ed (Sweet & Maxwell 2008) at 36-28.
92