Insurance Contracts CP - Law Reform Commission

4.17 Case-law also prescribes an inducement test. 27 Can an insurer satisfy materiality and
inducement by pointing to specific questions which are intended to obtain information on which the
proposer has answered incorrectly? This point is answered succinctly by the Law Commissions in the
2007 Consultation Paper:
―It might be thought that when a proposal form asks a question, the answer would always be
material and, if it were inaccurate, would amount to a misrepresentation. However this is not
so. Many questions are asked in rather general terms and it is difficult to know the full extent of
what is wanted. For example, an insured who is asked if they have had medical tests for
illness may not interpret this as referring to routine tests (for example blood pressure checks)
or even to non-routine tests that were completely negative. Their answer may be inaccurate or
incomplete. Whether the insurer will have a remedy depends on whether or not the incorrect
or missing information was material within the meaning of section 20(2). If it was, the insurer
will have a remedy for misrepresentation. If it was not, the insurer will have no remedy even
though the proposer knew that its answer was not wholly accurate.‖ 28
4.18 In the context of privacy law and data protection the insurer is only entitled to information that
can be held to be within the data protection principles, one of which is that a data controller must only
obtain personal data that is adequate, relevant and not excessive ―vis-à-vis the processing operations for
which the personal data is intended.‖ These processing operations themselves must be ―specified,
explicit and lawful‖ and the Code of Practice on Data Protection for the Insurance Sector (2008) 29
provides that the Data Protection Commissioner will examine the data capture practices of insurers ―on
an ongoing basis to ensure that only relevant information is sought and provided.‖ In fact the
Commissioner, in Case Study 1 of 2002 held that when insurance companies sought to collect personal
data relating to marital status as a standard question, this practice could not be relevant to issues of risk
and motor insurance. The Commissioner was ―pleased to read that the companies agreed to delete the
question and I trust [he wrote] that all companies in the industry are so doing.‖ At paragraph 4.99 of the
2007 Consultation Paper the Law Commissions however suggest that consideration should be given to
enacting a statutory presumption that the proposer would know that an issue is relevant to the insurer if a
specific question about that issue is asked by the insurer. The 2009 Report 30 and clause 5(5)(b) of the
Consumer Insurance (Disclosure and Representations) Bill 2011 provides such a presumption within the
context of an insurer‘s contention that the proposer acted fraudulently. While the Commission sees some
force in such a presumption, applying as it does to specific questions only, the Commission questions
whether such a presumption would be useful to insurers at formation of the contract stage. However
there may be some practical disadvantages. Such a presumption might encourage some insurers to
make the task of completing proposal forms burdensome and unduly inquisitive and bring about situations
that privacy law and the data protection principles are intended to prevent.
(7) Is a failure to answer questions misrepresentation?
4.19 Where the questions are set out in a proposal form and the proposer provides no answer or an
obviously incomplete answer, the courts have often struggled to provide a satisfactory response. At one
level a proposer who leaves a question blank might be suspected of doing so because he/she is unwilling
to provide information (eg on a criminal record or history of illness). Such conduct is consistent with
fraudulent concealment. On the other hand the question may not be answered because it is clearly
irrelevant, either in the view of the proposer or on any objective basis. Some proposal forms seek to deal
with this by directing that if an answer is not provided to a specific question it will be deemed to be a
negative answer, but MacGillivray gives examples of how such a deeming provision may not address
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Pan Atlantic Insurance v Pine Top Insurance [1994] 3 All ER 581.
Para 225.
www.dataprivacy.ie.
Paragraph 6.33 of Law Com 319.
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