Insurance Contracts CP - Law Reform Commission

4(2) of the Directive had this result, pointing to both the opinion of text books and Bankers Insurance
Company v South 21 . A policy of holiday insurance, which contained a term excluding accidents
occasioned by ―motorised waterborne craft‖, the insured being responsible for injuring another jet skier,
was held to be outside the scope of the Directive. On the other hand, Rühl contrasts the UK position with
that found in Germany:
[t]he provisions that implement the EC Directives, s.305-310 of the Civil Code do apply to
contractual provisions that impose obligations on the policyholders. This is because these
provisions are not considered to define the subject matter of the insurance contracts in the
meaning of s.307(1) of the Civil Code and paragraph 19 of the EC Directive. Instead, they are
classified as limitations or modifications of the subject matter which are not excluded from the
assessment of fairness. The pool of contractual provisions that actually define the subject
matter of the insurance contracts, in contrast, is determined rather narrowly: Only terms that
describe the core of the contractual agreement – meaning a brief description of the insured risk
as well as the premium to be paid – are deemed exempt from scrutiny under the EC Directive.
As a result, contractual obligations of the policyholder are not covered by the exemption of
s.307(1) of the Civil Code and – other than in England – are fully subjected to the assessment
of fairness 22
6.17 While there is no clear guidance in the European Communities (Unfair Terms in Consumer
Contracts) Regulations 1995 (which impm,emented the 1993 Directive) Ellis‘s views on core and noncore
provisions in Irish insurance contracts are of considerable interest.
(4) Core and Subsidiary Terms – An Irish View
6.18 Ellis provides a valuable analysis of the scope of the 1995 Regulations and a personal view on
when certain terms are likely to be reviewable by an Irish Court. Ellis begins his analysis 23 by
commentating that, in the abstract, the operative clause of an insurance policy (that is, the statement
about the extent of the cover provided) as well as exclusion clauses‖ are probably examples of core
terms‖. He stops short of arguing that all operative clauses and exclusions will be core terms. In relation
to insurance contracts other than life and personal accident insurance, such policies are contracts of
indemnity. The indemnity principle, as well as other attendant implied conditions such as subrogation and
contribution are terms which are required to be present on public policy grounds and are thus not
reviewable (along with the uberimae fidei principle) 24 . Ellis however goes even further by observing that
the provisions in the IIF Codes of Practice should also be regarded as mandatory rules, being implied
contractual terms. This is a view for which there is no judicial support and, given the uncertainty
surrounding the status of the IIF Codes of Practice, post the introduction of the Financial Regulator‘s
Code and the Financial Services Ombudsman‘s Statutory Adjudication mechanism, it is submitted that
the proposition is no longer arguable 25 . For policy reasons it is not desirable to define core obligations too
widely, even if some other IIF Code provisions seek to restrict or abridge rights afforded to insurers under
the ordinary law on insurance (e.g. on warranties).
6.19 On the question of basis of contract clauses, Ellis is very clear, although again the uncertain
status of the IIF Codes of Practice causes some difficulty for his argument that:
21
22
23
24
25
[2003] EWHC 380 (Comm).
(2006) 55 ICLQ 879 at p902-3 (footnotes omitted). On the core term issue generally see Principles of
European Insurance Contract Law p.116-117 which appears to suggest that ―England‖ (sic) and Ireland may
be isolated in giving the core provision exemption such wide scope.
Ellis, Modern Irish Commercial and Consumer Law (Jordan‘s 2004) Chapter 32.
Schedule 1(e)(i) of the Unfair Contract Terms Regulations 1995 (S.I. No.27 of 1995). Ellis also cites an
insurable interest requirement as being necessary on public policy grounds in every insurance contract. The
Commission suggests that this may be too extensive a claim.
Ellis was writing in 2004.
141