Insurance Contracts CP - Law Reform Commission

5.67 Nevertheless, the law reports are full of cases 111 where common law courts allow an insurer to
rely either on an object clause, or an exception, to refuse to honour a policy in circumstances where an
event or omission occurred, having no causal link with the accident. The Law Commission of England
and Wales and the Law Commissions, have repeatedly cited decisions that dictate that promissory
warranties, when breached, give the insurer ―the right to repudiate the whole contract from the date of the
breach regardless of the materiality of the term, the state of the mind of the insured, or the connection
between the breach and the loss.‖ 112 This situation is made even more difficult by virtue of the fact that
promissory warranties may be imputed relatively easily if the promise itself speaks to the future and it is
clear that the only real purpose that the warranty could have would be to commit the insured to meet the
terms of the stipulation on a continuing basis. Although there are some cases where the Irish courts
have read a promissory statement as having no such effect, 113 the weight of Irish case-law in relation to
conditions precedent as importing future obligations tend to favour the insurer. 114
5.68 The first meaningful analysis of this situation took place in New Zealand. The Contracts and
Commercial Law Reform Committee 115 critically examined two New Zealand decisions that allowed an
insurer to avoid liability when promissory warranties were held to have a temporal element (ie cover not
available whilst certain facts existed).
5.69 This New Zealand case-law concerned accidents involving motor vehicles being driven whilst
in an unsafe condition (eg bald tyres). 116 The fact that the vehicle was being driven at a time when the
condition itself would not have caused the accident was held in these cases not to disentitle the insurer
from repudiating the policy. In Parsons v Falmers Mutual Insurance Association 117 an exclusion from
cover of a driver ―whilst intoxicated‖ became relevant after the insured was killed outright when the
vehicle he was driving struck a bridge. The insured‘s intoxicated condition was not in issue but there was
scant evidence that the degree of impairment contributed to the accident. Nevertheless, the New
Zealand Court of Appeal held that the exclusion whilst intoxicated:
―gave an insurance company a broad means of relieving the company from liability, the
underlying consideration being that he who is intoxicated is far more likely to suffer bodily injury
by accident than he who is sober. It is clear that the word ―whilst‖ does not import a causative
relationship between the state of intoxication and the happening of the event amounting to
accident.‖ 118
5.70 Section 11 of the Insurance Act 1977 accordingly introduced a mechanism whereby the
insured could recover upon proving, on the balance of probability that the loss was not caused or
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See MacGillivray, para. 10-040. The causal connection requirement in Civilian systems for precautionary
measures is discussed in the ‗mixed‘ South African system by Van Niekerk at (2010) 22 Sa Merc LJ 259,
arguing that judicial endorsement of the Civil law approach can be found in earlier Roman-Dutch law decisions
and that a modern South African court should act ―to put the matter beyond doubt‖ (p.271).
Eg Law Commission Working Paper No. 73, para. 99, citing inter alia Pawson v Watson (1778) 2 Comp 785,
587; De Hahn v Hartley (1786) 1 T.R. 343.
Eg Gorman v The Hand in Hand Insurance Co (1877) IR 11 CL 224; Weir v Northern Counties of England
Insurance Co (1879) 4 LR Ir 689.
Gamble v Accident Assurance Co Ltd (1869) IR 4 CL; Patton v Employers‟ Liability Insurance Corp (1887) 20
LR Ir 689; Re the Equitable Insurance Co Ltd [1970] IR 45. Note that the Supreme Court, in Capmel Ltd v
Lister (No.1) [1989] IR 319 dismissed an appeal from Costello J holding for an insured on the basis that the
onus lay on the insurer to draft a condition precedent in such a way as to have the desired result.
Reporting in 1975.
State Insurance General Manager v Harray [1973] 1 NZLR 276; Yaxley v New Zealand Insurance Co Ltd
[1973] 2 NZLR 231.
[1972] NZLR 966.
[1972] NZLR 966 at 976, (MacArthur J), citing Public Trustee v NIMU Insurance Co [1967] NZLR 530 and
Abraham v Norwich Union Fire Insurance Society Ltd [1970] NZLR 968.
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