Insurance Contracts CP - Law Reform Commission

than, for example, negligent misstatement) is, in the view of the Commission, helpful. Clause 5 of the
2011 Bill provides, in part:
―(2) A qualifying misrepresentation is deliberate or reckless if the consumer -
(a) knew that it was untrue or misleading, or did not care whether or not it was untrue or
misleading, and
(b) knew that the matter to which the misrepresentation related was relevant to the
insurer, or did not care whether or not it was relevant to the insurer.
(3) A qualifying misrepresentation is careless if it is not deliberate or reckless.
(4) It is for the insurer to show that a qualifying misrepresentation was deliberate or reckless.
(5) But it is to be presumed, unless the contrary is shown –
(a) that the consumer had the knowledge of a reasonable consumer, and
(b) that the consumer know that a matter about which the insurer asked a clear and
specific question was relevant to the insurer."
4.66 In the case of an innocent (ie non fraudulent) misrepresentation, the recasting of the duty of
disclosure to a duty on the consumer to be honest and careful in answering questions or volunteering
information, has, as a consequence, that the insurer should not be entitled to refuse to pay the claim, or
to avoid the policy on the ground that there was a misrepresentation by the consumer. 74 The
Commissions also developed the implications of the duty to act carefully, ie reasonably, in relation to
factual matters that the consumer might not think would render the statement inaccurate. Furthermore,
the type of policy, the way in which it was sold and the normal characteristics of consumers who purchase
the policy are to be taken into account, as are the personal characteristics of the actual proposer, insofar
as these were known to the insurer. The Commissions also initially recommended that the burden of
showing that the consumer acted unreasonably in making the misrepresentation should be on the insurer.
4.67 This approach was the subject of criticism in some of the responses to the Consultation Paper
but the Law Commissions‘, in the 2009 Report indicated that some respondents misunderstood the
situation, specifically that insurers only had to show carelessness on the part of a reasonable consumer,
not the actual consumer. Nevertheless there is no burden of proof provision for careless
misrepresentation. In contrast to clause 5(4) (deliberate or reckless misrepresentation) Clause 3 sets out
this ―reasonable care‖ test:
―(1) Whether or not a consumer has taken reasonable care not to make a
misrepresentation is to be determined in the light of all the relevant circumstances.
(2) The following are examples of things which may need to be taken into account in
making a determination under subsection (1)–
(a) the type of consumer insurance contract in question, and its target market,
(b) any relevant explanatory material or publicity produced or authorised by the
insurer,
(c) How clear, and how specific, the insurer‘s questions were,
(d) whether or not an agent was acting for the consumer.
(3) The standard of care required is that of a reasonable consumer: but this is subject to
subsections (4) and (5).
(4) If the insurer was, or ought to have been, aware of any particular characteristics or
circumstances of the actual consumer, those are to be taken into account.
(5) A misrepresentation made dishonestly is always to be taken as showing lack of
reasonable care.‖
74
Law Com No. 319/Scot Law Com No. 219 (December 2009) para 6.13.
107