Insurance Contracts CP - Law Reform Commission

―Basis of contract clauses would be assessable by a court as non-core terms under the 1995
Regulations, had the Codes of Practice not effectively abolished them‖.
6.20 The express terms that Ellis regards as being reviewable on the basis that they are subsidiary
and unlikely to have been individually negotiated he sets out as follows:
(1) duty on insured to notify increases in risk (or change of insured‘s circumstances);
(2) duty on insured to take reasonable care of property insured;
(3) duty to inform insurer immediately of any alienation or transfer of the insurable interest;
(4) terms under which the policy can be cancelled prematurely by both parties;
(5) arbitration conditions;
(6) claims conditions requiring the insured:
(a) to give the insurer notice of a possible claim as soon as reasonably possible;
(b) not to admit liability (in third party insurances) for, or negotiate settlement of, any
claim without the insurer‘s written consent;
(7) imposing a duty on the insured not to act in a fraudulent manner, and making it clear that
if any claim is fraudulent, it will not be paid and all cover under the policy will be forfeited;
(8) express conditions modifying the common law doctrine of subrogation and contribution
may also be included 26
6.21 Ellis and Wiltshire in Regulation of Insurance in the UK, Ireland and the EU 27 give their view on
the boundary between core and non-core insurance terms:
‖It is submitted that the following might be considered examples of core insurance contract
terms:
• contents of operative clauses describing the events insured;
• exclusions from cover;
• the condition of utmost good faith;
• express conditions requiring an insured to disclose material changes in the risk‖ 28
Ellis and Wiltshire also observe that cancellation and arbitration clauses would also seem to be prima
facie unfair terms although they note an unreported Circuit court decision on arbitration clauses in a
holiday insurance case that stands against this position. 29 . Ellis and Wiltshire also suggest that non core
terms ―might include‖
• ―conditions precedent to liability, i.e. claims notification conditions and nonadmission
of liability conditions
• arbitration conditions (mentioned specifically in s.1(q) of Sch.3);
• cancellation conditions (see s.1(f) of Sch.3);
• possibly express subrogation and contribution conditions but only to the extent
that they vary the common law conditions. These conditions of subrogation and
contribution implied at common law are so fundamental that they are unlikely to
be subject to the tests in Sch.3.‖ 30
(5) Non Core Terms and Exclusions – The Law Commissions Joint Consultation Paper
6.22 The Law Commissions, in the 2007 Consultation Paper, provide a succinct example of a
situation where the same insurance product might fall on either side of the core/noncore term boundary,
depending on context:
―take a case where a policy was sold as ―insurance for winter sports adventure holidays‖, but a
sub-paragraph of one of the lengthy policy terms excluded off-piste skiing, and no particular
26
27
28
29
30
Para 32.8, footnotes omitted.
Thomson Reuters (2 Volume Looseleaf).
Ellis & Wiltshire, Regulation of Insurance in the UK, Ireland and the EU (Thompson Reuters) page E2.37.
See E. 2-36.
E.2-37. The authors also observe that contractual duties of pre-contractual disclosure may be seen as one of
the circumstances that might be considered in assessing the fairness or otherwise of a particular term. This
comment seems to be directed at the question whether a proposer has been informed of the nature and
consequences of the duty, so some fundamental implied duties are relevant under SI 27 of 1995.
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