Insurance Contracts CP - Law Reform Commission

Commissions also viewed these rules as being applicable to warranties, strictu sensu, that is, exclusions
and temporal restrictions were not to be controlled vis a vis these warranties provisions.
(18) Warranties in Business Insurance (the 2007 Consultation Paper)
5.54 The first recommendation is that the insurer will have to provide the business insured with a
written statement detailing the warranties that are binding upon the business insured, either before the
contract is made or as soon as possible thereafter. There is no recommendation as to the amount of
detail the insurer should provide, as there is in relation to consumer insurance. The second
recommendation is that the parties are to be free to vary the effect of breach of warranty by agreement,
but that any such terms must not produce insurance cover that is substantially different from what the
insured reasonably expected. A statutory reasonable expectations test is proposed as a business
insurance counterpart to the ―good faith‖ standard found in the Unfair Contract Terms Directive, which is
of course applicable to consumer insurance only.
(19) The 2009 Report and Draft Bill
5.55 For the moment, the Law Commissions have left warranties reform to one side. The 2009
Report explains the situation in this way: 101
―Our consultation paper discussed the problems of warranties, which are terms in insurance
contracts that may have particularly draconian consequences. This draft Bill does not reform
the law of warranties, except to abolish ―basis of the contract‖ clauses. The main reason is that
the need for reform is less pressing. Warranties in the strict legal sense are used only rarely in
consumer insurance. And if they are used unfairly, consumers have remedies not only under
the Financial Services Authority (FSA) rules but also under the Unfair Terms in Consumer
Contracts Regulations 1999. Furthermore, we think that the law on consumer warranties
should be consistent with the law on business warranties. We have therefore decided against
separate rules on warranties which would apply only in a consumer context.‖ (footnotes
omitted)
(20) New Zealand Legislation
5.56 The position in New Zealand is a relatively straightforward one, the legislative response to precontractual
mis-statements being directed at closing down the right of an insurer to avoid a policy of
insurance for any misstatement unless certain conditions are met. 102 Three situations must be
distinguished.
i) In respect of general insurance, that, is non life policies, there is no right to avoid a policy
only by reason of a statement made in any proposal or other document on the faith of which
the contract was entered into, reinstated or renewed, unless the statement
(a) was substantially incorrect; and
(b) material.
ii) In relation to life policies concluded in such circumstances, there is no right to avoid
unless the statement
(a) was substantially incorrect; and
(b) was material;
(c) was made fraudulently or within three years of either
(i) the date on which the insurer sought to avoid the policy, or
(ii) the date of the death of the life assured,
101
102
Paragraph 1.22 of the 2009 Report.
Insurance Law Reform Act 1977, s.5.
123