Insurance Contracts CP - Law Reform Commission

whether in all the circumstances it is fair to hold him bound by the condition in question. This
may yield a result not very different from the civil law principle of good faith, at any rate so far
as the formation of the contract is concerned‖ 5
6.04 If the condition in question is clearly displayed on a website for example, and the user
repeatedly accesses the website, then reasonable notice will have been given: Ryanair Ltd v
Billigfluege.de GmbH 6 . But an unusual and oppressive term in an employment contract was held not to
have passed the Interfoto standard by TC Smyth J in Finnegan v JE Davy. 7 Even in the absence of
Interfoto, there are several Irish decisions on incorporation that signify a higher duty to spell out the
existence and import of sweeping contractual terms, as distinct from mundane or unobjectionable
conditions of contract. 8
6.05 The general proposition behind the Interfoto ―good faith‖ approach to unusual or onerous
contractual clauses that have neither been individually negotiated nor specifically drawn to the attention of
the proposer/insured has recently been applied to insurance contracts in US Trading Ltd v AXA Insurance
Co Ltd. 9 The clause in question here was a stipulation that the proposers, a food processing company,
would be required to clean the cooker extraction system every three months. Following a fire at the
premises, the insurer repudiated the policy on the basis that the stipulation was a warranty and that it had
not been complied with. Starting from the position that when a proposer entered into a contract of
insurance the proposer did so on the insurer‘s normal terms, the alleged warranty was not shown to have
been a normal term, nor was it individually negotiated: as such the alleged warranty was not part of the
contract. The warranty was regarded as particularly onerous and such terms would only be incorporated
into a policy if it was brought fairly and reasonably to the attention of the proposer. Simon Brown QC,
sitting as a Deputy Judge in the English Queens Bench Division, refused to allow the insurer to rely upon
the special clause:
‖Special Condition 4 was a particularly onerous term. An onerous term will only be
incorporated into a policy if it is brought fairly and reasonably to a party‘s attention… There is
no evidence that Special Condition 4 was brought to the attention [of the insured]‖ 10
(1) Interpretation of the Exclusion
6.06 The cases on this point are legion but a recent English decision gives a flavour of how an
exclusion in a policy may be denied effect by giving the words of a clause a plain and ordinary meaning.
In Widefree Ltd v Brit Insurance Ltd 11 a jeweller in Hatton Garden discovered that a ring from his stock
had gone missing when he attempted to show the ring to a particular customer. The jeweller recalled an
earlier incident in his shop when two customers had acted suspiciously. After reviewing CCTV footage
the jeweller called in the police who agreed that the theft had taken place at the time of the earlier
incident. The policy contained an unexplained loss exclusion when the loss was discovered at
stocktaking. The High Court held the exclusion did not apply. The CCTV and other evidence identified
the time when the loss occurred as being outside the stocktaking exercise – that word ―stocktaking‖
related to a structured organised process taking place at regular intervals. This discovered loss was not
within any such framework. Apart from incorporation rules, judges can subject express terms to a
process of hostile interpretation. This is particularly the case in relation to exclusions and promissory
5
6
7
8
9
10
11
[1988] 1 All ER 348 at 357. See generally Zimmerman and Whittaker, Good Faith in European Contract Law
(CUP 2000).
[2010] IEHC 18: Century 21 Canada Limited Partnership v Rogers Communications [2011] BCSC 1196.
[2007] IEHC 18
Western Meats v National ICC and Cold Storage [1982] ILRM 101; Sugar Distributors Ltd v Monaghan Cash
and Carry Ltd [1982] ILRM 399.
[2010] Lloyd‘s Rep IR 505.
Ibid, p 515.
[2009] Lloyds Rep IR 440. See also Reilly v National Insurance and Guarantee Corp Ltd [2009] Lloyd‘s Rep.
IR 488 (exclusion for failure of machinery: incorrect pressure in a cylinder not failure of machinery).
138