Insurance Contracts CP - Law Reform Commission

and the consequences that follow on from an insurer seeking to acquire broader rights to avoid a policy
by way of basis of contract clauses.
5.64 In this Part, the Commission considers three issues that arise generally after the loss has
materialised. Firstly, the existing law does not require the insurer to show that a promissory warranty as
to the future was either material to the cause or a contributory factor to the loss. The Commission
considers whether the law should continue to reflect this position. Secondly, in the event that the law
needs to be changed, the Commission considers whether a solution could be provided by Articles 4:102
and 4:103 of the Principles of European Insurance Contract Law (PEICL). Thirdly, the Commission
explores the relationship between promissory warranties and exclusions in insurance contract law. In
each of these three sections it will be seen that judicial activism has taken some of the sting out of these
promissory warranties and exclusions but the Commission puts forward some possible legislative
amendments that might make the law clearer and fairer, meeting the reasonable and commercial
expectations of Irish insureds.
(1) Warranties and Causation
5.65 An insurer may seek to limit cover to a number of possible contingencies or seek to exclude
from cover a range of eventualities by way of exclusion clauses. Restrictions of this kind are
understandable and acceptable where the circumstances in question may extend the scope of the risk, as
long as the restrictions are transparent and are reflected in the premium charged. However, where the
restriction takes the form of a promissory warranty, there is a danger that individual insurers might be
tempted to repudiate liability, even when there is no causal link between the loss that has occurred in a
given case and the risk referred to in the policy.
5.66 In some cases an insurer will take statistical or actuarial evidence that certain kinds of insureds
or activities, or geographical locations, might lead to increases in risk; inexperienced drivers, specific
winter sports activities or politically volatile holiday destinations may be the subject of exclusions or
restrictions in relevant insurance policies; the use of motor vehicles for business or commercial purposes,
as distinct from private use, affords an example. In Jones v Welsh Insurance Corporation 108 a motor
policy restricted cover to business use of the insured qua his trade as a motor mechanic. The insured
was also a part-time farmer. An accident occurred when the insured‘s brother was driving the vehicle and
transporting two sheep and two lambs to grazing. The restrictions on cover meant that the loss was not
recoverable. In Kelleher v Cristopherson 109 the claimant was a labourer who used his car to drive to and
from his work at Haulbowline. The claimant kept a few pigs and regularly obtained pig swill from the
canteen at his workplace, transporting the swill in his car. An accident occurred whilst transporting the
pig swill on the claimant‘s returning from work. Judge Neylon took the view that the claimant was
engaged in pig farming by way of a hobby or amusement, rather than by way of a business, distinguishing
the decision in Jones on the basis that, in Jones, the insured was not driving the vehicle at the time of the
accident and the business activity being undertaken was outside the insurance. In the instant case the
fact that the insured was transporting swill was irrelevant. Judge Neylon continued:
I cannot accept the proposition that by carrying swill he thereby converted a journey which was
covered by insurance into one which was not so covered. It appears to me that when a person
is using his car for a purpose which is apparently covered by his policy of insurance, there is a
very heavy onus on the insurance company to discharge before it can establish that such a
user has ceased to be insured by reason of some action of the insured. As in this case, it is a
fact that the insured was returning home from work and thus is covered by insurance. To
deprive him of this benefit it must be proved that he has done something which alters the
nature of the journey or user of the car. 110
108
109
110
[1937] 4 All ER 149.
(1957) 91 ILTR 191.
(1957) 91 ILTR 191, at 195.
125