Insurance Contracts CP - Law Reform Commission

whilst stopped at traffic lights, 125 as should the unfortunate driver of a vehicle damaged by a falling tree,
the vehicle being in an unroadworthy condition, 126 the Law Commissions felt that there should be
limitations on a causal connection test:
The causal connection test should not apply, for example, where a motor policy specified that
drivers must be aged 30 or over, and the vehicle was driven by a 20 year old. The insurer
should be entitled to refuse the claim, even if the accident was caused by someone else‘s fault.
Similarly, if a marine insurance contract any loss that took place in the Gulf, even if the location
did not cause the loss. The same should apply if a car insured for private use is being used
full-time as a taxi. There comes a point where the activity generating the loss is so far
removed from the activity covered by the policy that the policy should not apply at all. 127
5.76 The Law Commissions have since however retreated somewhat from the New Zealand
approach, favouring a causal connection test that is confined to warranties. The New Zealand approach
was criticised on the basis that the proposed new section 11(3) list was arbitrary, applying to a ship
excluding cover whilst in the English Channel but not where an insurer specified that the ship should
retain its classification. 128
5.77 Notwithstanding the force of these points, the Commission sees the New Zealand solution as
having considerable attractiveness. The Commission believe that it is relatively easier to understand than
the Australian provision, as well as the England and Wales proposed text from 1980, and the proposed
causal connection test in the 2007 Joint Consultation Paper. The Commission believe that section 11
strikes a reasonable balance insofar as the insured is required to prove that the event did not cause or
contribute to the event (explicable in terms of the New Zealand case-law prior to 1977). On the issue of
arbitrariness the Commission recognises that the closed list in the proposed section 11(3) has this
disadvantage, but the Commission does not see this as an insuperable obstacle and it represents a
considerable imporvement on existing Irish law and the original section 11 solution in the New Zealand
1977 Statute.
5.78 For example, a general ―catch-all‖ provision could be added: 129 a system of delegated
legislation could be put in place to narrow or broaden these exceptions, as the case may be. The
continued use of conditions precedent in business to business insurance contracts which stand outside
the existing 2005 limit on the extended definition of consumer insurance could be effective. Indeed,
section 11 of the New Zealand provision, and this suggested amendment, could be a default provision for
such business insurance contracts: it has been said by Lord Justice Aitkins that the Law Commissions
have not stated that professional insurers and their commercial clients agree that ―the law on warranties
is out of line with the reasonable expectations of both sides – in insurer and assured – or even those of
the assureds alone.‖ 130 Lord Justice Aitkins went on to argue against assimilating the positions of all
proposers into one paradigm:
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A New Zealand Contract and Commercial Law Reform Committee (1975) example.
Law Commissions Joint Consultation Paper, para. 8.33.
Joint Consultation Paper, para. 8.35.
Joint Consultation Paper, 8.37. The ALRC made the same comment, noting that the original 1977 provision
was aimed at exempting provisions rather than warranties. In South African Law, the Long-term Insurance Act
(No.52) of 1998, section 59, and the Short-term Insurance Act (No.53) of the same year require
representations of past and present fact to be material, even if the contract converts such representations into
warranties. Promissory warranties on the other hand, as contractual promises as to the future, must be met.
Giving the insured the opportunity to discharge the onus of proof. On balance however the Commission
believes it will be better to enact the proposed section 11 New Zealand amendment without further
modification.
The Law Commissions‘ Proposed Reforms of the Law of ―Warranties‖ page 117, in Soyer, Reforming Marine
and Commercial Insurance Law, at p.117.
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