Insurance Contracts CP - Law Reform Commission

consumer acquis, that is, the PEICL Article 2:304, to small business insurance disputes and the
Commission provisionally so recommends.
5.94 While the Commission believes that this solution should be generally effective, it may be that
there is a discrete problem where insurers rely upon promissory warranties so as to reject claims because
of breach of a warranty even if breach had no causal link ‗with the loss‘. The New Zealand 1977
legislation, section 11 was explained as being concerned with the following kind of situation:
―a vehicle the driver of which is intoxicated or which is (perhaps unknown to the driver) in an
unsafe condition is struck from behind while waiting at traffic lights [and liability to indemnify is
avoided] even though the intoxication or the unsafe condition did not contribute to the loss in
any way.‖ 154
5.95 An exclusion from cover, an exemption clause, a condition precedent to liability of the insurer,
and a promissory warranty, are all contractual methods of defining the risk and/or limiting the liability of
the insurer. In cases where the clause requires the insured or the policyholder to act so as to prevent the
risk from materialising, such clauses are generally regarded as promissory warranties. 155 However, the
Commission believe that cases which require warranties to be the subject of a rule of reasonable
construction, for example, can limit the warranty by reference to suspensory principles. Although not
strictly a warranty case, Chief Baron Palles, in Gorman v The Hand in Hand Insurance Co 156 limited cover
on agricultural equipment to instances where the machinery was in storage in a defined place. Use
elsewhere on the farm took the machinery off cover but when return to storage the cover resumed. 157
5.96 Many of the problems that arise in relation to future warranties, or exceptions that may appear
to contain a temporal rather than a causal element, can and will be dealt with under the general scheme
found in relation to abusive clauses, considered in the following chapter. The need for clear and
transparent drafting of contractual provisions (even provisions which are central or core provisions) as
well as a requirement that the clause meet the reasonable expectations of the proposer/insured, are
imperatives to be met by insurers vis a vis consumers and most businesses. 158 The decisions of the non
statutory Insurance Ombudsman of Ireland and the statutory Financial Services Ombudsman contain
several instances where temporal restrictions, 159 as well as over-broad definitions and interpretations, 160
were imposed on insureds. Seen in the light of an insurer‘s legitimate right to either define or limit the risk
being accepted by the insurer, there is nothing objectionable about this. The Commission has not found
any compelling evidence to suggest that Irish insurers systematically use promissory warranties in an
objectionable manner although there will always be room for debate in marginal cases. One decision
under the non-statutory Insurance Ombudsman Scheme, and one example taken from the Financial
Services Ombudsman‘s case files illustrate the point.
a contents policy covering burglary contained a very specific warranty relating to a burglar alarm
being installed and maintained to the IS 199 standard. The alarm was disconnected to allow
patio work to be undertaken. The new patio door installed was not reconnected, the fitter and
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NZLC R 46 Some Insurance Problems (1998), page 24-25, citing the NZ Contracts and Commercial Law
Reform Committee, Aspects of Insurance Law (1975).
Contrast notification of claims obligations which can have different purposes: Aspen Insurance UK Ltd and
others v Pectel Ltd [2009] Lloyd Rep IR 440.
(1877) IR 11 CL 224.
This approach is also evident in some recent English cases – Hussain v Brown [1996] 1 Lloyd‘s Rep 627;
Pratt v Aigaion Insurance Company SA [2009] 1 Lloyd‘s Rep 225; AC Ward and Son Ltd v Catlin (Five) Ltd
and others (No.2) [2010] Lloyd‘s Rep IR 695.
See the international standard promoted by the International Association of Insurance Supervisors, at
www.iaisweb.org.
Mostly in relation to claims and time limits. These were often side stepped via waiver reasoning see eg Case
85 of the Insurance Ombudsman of Ireland 1992-1998.
Financial Services Ombudsman, Case Studies, June 2009 p.20 (meaning of disability).
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