Insurance Contracts CP - Law Reform Commission

whichever is the earlier event. 103
iii) Where however the misstatement is made prior to a life policy being concluded and the
misstatement relates to the age of the life assured, avoidance is not possible and the insurer
must vary the contract by substituting a (presumably lesser) sum than that assured, in
accordance with a proportionality test. 104
5.57 The New Zealand Law Commission, in its 1998 Report, Some Insurance Law Problems 105 did
not revisit these provisions in the 1977 legislation, and the 2004 Report, 106 made minor adjustments in
respect of a draft consolidation Bill that are pertinent to warranties insofar as the warranty is regarded as
a misstatement. Proposals for further reform of the law relating to non-disclosure and misrepresentation
are under consideration in the form of the New Zealand Ministry of Economic Development Report,
Review of Financial Products and Providers, 107
(21) Provisional Recommendations
5.58 The Commission provisionally recommends that breach of a contractual warranty in an
insurance contract should no longer lead to the contract being avoided from the date of breach, but that,
as in other cases of misrepresentation, the contract should be voidable at the option of the person to
whom the misrepresentation was made (and that, to avoid any doubt, it should be provided that section
33(3) of the Marine Insurance Act 1906, which deals with breach of contractual warranty, is confined to
MAT insurance).
5.59 The Commission provisionally recommends that, where an insurer is entitled to avoid an
insurance policy claim for breach of warranty, the insurer should also be free to reject the claim without
repudiating the entire insurance policy.
5.60 The Commission provisionally recommends that the entitlement of an insurer to avoid a policy
or a claim for breach of warranty should depend on whether the insured was provided at the precontractual
stage, or contemporaneously with the conclusion of the contract, with the information required
by the duty of disclosure (as already defined in this Consultation Paper). The Commission provisionally
recommends that, in respect of promissory or continuing warranties that arise after the contract has been
agreed, the insurer must provide the proposer with a clear statement prior to the formulation of the
contract about the scope of the continuing obligations imposed upon the proposer when he or she
becomes the insured. The Commission invites submissions on how this requirement may best be
satisfied, particularly when the cover is obtained on-line.
5.61 The Commission provisionally recommends that legislation should provide that a breach of
warranty does not arise in respect of matters of past or present fact where the insured can prove that the
statement was true to the best of his or her knowledge or belief.
5.62 The Commission provisionally recommends that legislation should provide that statements of
fact or opinion shall not be converted into a contractual warranty by anything stated in the contract, so
that “basis of contract” clauses shall be deemed invalid.
C
Non-Observance of Warranty after Conclusion of Contract
5.63 In this Part, the Commission considers the problems that may arise after the contract of
insurance has been concluded and the insurer invokes non observance of a warranty so as to avoid the
contract. In Part B, the Commission focused on warranties of past and existing fact, misrepresentation
103
104
105
106
107
Insurance Law Reform Act 1977, s.4.
Insurance Law Reform Act 1977, s.5. Schedule C to NZLCR 87, Life Assurance proposed a statutory formula
based on the 1984 Australian model.
NZLCR 46, Life Assurance: See Campbell, Insurance [1999] NZLR 191.
NZLCR 87.
September 2006 (ISBN 978-0478-30414-5).
124