Insurance Contracts CP - Law Reform Commission

(8) Spent Convictions
4.25 In the 2007 Report on Spent Convictions, 36 the Commission considered the general question of
whether Irish law should contain provisions permitting a convicted person to lawfully refuse to disclose
past convictions. The Commission noted that the debate ―begins with an acknowledgment that a criminal
record is not necessarily a good predictor of an individuals current or future behaviour.‖ The Spent
Convictions Report recommends, and s.4(2) of the Draft Spent Convictions Bill 2007 contained in the
Report provides, that a rehabilitated person who is asked questions in relation to previous convictions
may treat that question as not relating to a spent conviction; nor is the rehabilitated person to be
prejudiced by failure to disclose or acknowledge that conviction. The draft Spent Convictions Bill directs
that a conviction is spent if, following custodial sentence for a term not exceeding six months, seven
years have elapsed from the date of conviction, the period is five years following the conviction or when
the order ceases to have effect, whichever is the earlier. Questions put to a person are not to be
regarded as disclosure of spent convictions, save where the conviction relates to a conviction for fraud,
deceit or an offence of dishonesty in relation to an offence of dishonesty in relation to an insurance claim
and the fact in question is not excused form disclosure on any insurance proposal form. Subject to
limiting provisions section 4(4) of the Bill provides that ―an obligation imposed on any person by any rule
of law…shall not extend to requiring him or her to disclose a spent conviction or any circumstances
ancillary to a spent conviction‖ (as defined). The Bill provides exceptions in the form of excluded
sentences and for disclosure to be made in respect of excluded employment, as therein defined. The
focus of these legislative initiatives is quite properly upon the rehabilitation of offenders, and the
Commission has concluded that it is appropriate to consider spent convictions with a view to providing a
proportionate but focused response to the ―moral hazard‖ concerns of insurers. In this respect, the
Commisison notes that the Government Legislation Programme, Autumn Session 2011, proposes to
publish a Spent Convictions Bill in 2012.
4.26 The Commission invites submissions as to whether the existing duty of disclosure and/or rules
on misrepresentation, intended by insurers to identify the moral hazard that an underwriter may be facing,
need to be reconsidered; and in particular, in relation to convicted persons, whether there are
circumstances where a conviction (other than for insurance fraud) should be exempt from the duty to
disclose or the duty to answer questions carefully and truthfully.
C
Misrepresentation – rescission as the primary remedy
4.27 The law of contract, in historical terms, does not have any controlling influence on the
consequences that follow on from the provision of false or misleading information prior to a contract being
concluded. Until relatively recently oral statements made during negotiations were not freely incorporated
into a contractual relationship. 37 The law of tort and principles of equitable relief tended to fill the void,
with equity providing a misrepresentee with the somewhat draconian remedy of rescission of the contract,
ie the right to withdraw from the transaction in certain circumstances. 38 This right was available in equity
even if the misrepresentation was made innocently, that is without fraud or was not carelessly given. One
of the purposes behind the UK Misrepresentation Act 1967, 39 which is broadly comparable to Part V of the
Sale of Goods and Supply of Services Act 1980, was to curtail rescission by giving a court a discretion to
award damages in lieu of rescission. While in theory these provisions apply to insurance contracts, the
effect of the Marine Insurance Act 1906 has been much more influential as the 1906 Act creates a parallel
right of avoidance, rather than termination, to an insurer for a proposer‘s misrepresentations.
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37
38
39
Case Study 22 of 2000.
Report on Spent Convictions, para 1.29.
Eg: Bank of Ireland v Smith [1966] IR 161; Carey v Independent Newspapers [2003] IEHC 67.
For England and Wales. For Northern Ireland see the Misrepresentation Act (Northern Ireland) 1967. Section
3 of both 1967 Acts was replaced by s.8(1) of the Unfair Contract Terms Act 1977.
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