Insurance Contracts CP - Law Reform Commission

may properly consider to be relevant in deciding to underwrite the proposal. Motor insurance and
property insurance is often underwritten on the basis of the age, identity, qualifications or experience of a
driver, a geographical area within which the loss must, or must not, occur, or the restriction of use to non
commercial use. While the proposed amendment to section 11 of the Insurance Law Reform Act 1977
has not yet been enacted, it suggests (as the Law Commissions themselves said in the 2007
Consultation Paper) a focused and practical answer to a difficult problem of causation.
5.73 The proposed section 11 reads:
(1) An insured is not bound by an increased risk exclusion if the insured proves on the
balance of probability that the loss in respect of which the insured seeks to be indemnified
was not caused or contributed to by the happening of an event or the existence of a
circumstance referred to in the increased risk exclusion.
(2) For the purposes of this section, an increased risk exclusion is a provision in a contract of
insurance that
(a) defines the circumstances in which the insurer is bound to indemnify the insured
against loss so as to exclude or limit the liability of the insurer to indemnify the
insured on the happening of certain events or on the existence of certain
circumstances; and
(b) so defined the liability of the insurer, in the view of the court of arbitrator determining
the claim of the insured, because the happening of such events or the existence of
such circumstances was in the view of the insurer likely to increase the risk of loss
occurring.
(3) A provision is not an increased risk exclusion for the purposes of this section that
(a) defines the age, identity, qualifications or experience of a driver of a vehicle, a pilot of
an aircraft, or an operator of a chattel; or
(b) defines the geographical area in which a loss must occur if the insurer is to be liable
to indemnify the insured; or
(c) excludes loss that occurs while a vehicle, aircraft, or other chattel is being used for
commercial purposes other than those permitted by the contract of insurance.
5.74 The New Zealand Law Commission itself suggested that a broader solution would be possible,
via a definition of a contractual provision, which is not an increased risk exclusion, if based on ―actuarial
or statistical data establishing an increased risk of loss‖: this option was discounted on the basis that such
a provision would ―wipe out the original [s.11] reform‖. Nor did the New Zealand Law Commission favour
the adoption of the Australian response, section 54 of the Insurance Contracts Act 1984. The New
Zealand Law Commission regarded the Australian provision as being, in general, ―sweeping and
unfocused‖, out of sympathy with the habits of insurers and insurance law practitioners, likely to provoke
litigation and, ultimately, unlikely to prove judge-proof. Even supporters of s.54 – and it is fair to say that
Professor Merkin for example found much to praise in that section – regard it as difficult. 124 Even the
reforms of The Australian Treasury Review in the form of the Insurance Contracts Bill 2010 directed at
much broader issues than the causation problem in warranties/exemptions as to the future, may not
resolve the section 54 problem. It should also be noted that Australian consumer law, unlike Irish
consumer law is currently defective in providing specific protection for consumers; in sum, the
Commission believe that a section, 54 provision would not be a satisfactory basis upon which to form an
Irish legislative solution to the problem at hand.
5.75 The Law Commissions, in their 2007 Consultation Paper, reached much the same kind of
conclusion over section 54. While the New Zealand 1977 provision and the proposed amendment would
continue to deal with the situations that prompted the reform in the first place, eg an intoxicated driver
should be able to recover for damage to the drivers vehicle when struck from behind by another vehicle
124
Merkin, ―Reforming Insurance Law: is there a case for Reverse Transportation?‖
128