Insurance Contracts CP - Law Reform Commission

―consumer‘s reasonable expectations‖ standards 44 . It may be that even if the term is subject to the
fairness test it would pass muster 45 , but the need for clear and transparent drafting and accessibility to
contractual terms in a timely fashion seem a reasonable precondition to set for the validity of core
provisions and other essential terms. The Directive generally appears to be concerned with situations
where the court concludes that there was such a lack of openness, fair dealing or good faith so as to
render a contractual provision unfair. 46
6.33 Clauses that may be found in insurance contracts that are referred to in the Annex to the 1993
Directive and in Schedule 3 of the European Communities (Unfair Terms in Consumer Contracts)
Regfulatinos 1995 (which implemented the 1993 Directive in Ireland) are grouped under the following 6
headings by the authors of the PEICL:
1. Hidden Terms: These include terms that are not fully disclosed or intelligible to the
consumer, terms which cross refer to legal provisions not disclosed in the contract ―small print‖
provisions and entire agreement clauses.
2. Exculpatory Provisions: Terms excluding or limiting liability for non-performance or
defective performance, one sided performance obligations.
3. Terms imposing Barriers to Redress: These clauses include evidentiary obstacles,
onerous rules on maintaining and proving a claim, arbitration clauses, clauses that otherwise
enable slow payment of a claim.
4. Cancellation Clauses: Insurers having unilateral rights to cancel, particularly when this
can be done without the insured being able to arrange cover or recover the premium.
5. Unilateral Variation of Cover. For example, an insurer, who, without good cause, can
unilaterally vary either the cover or the premium, or assign the policy, may have to defend such
a clause.
6. Penalty provisions. A term that imposes a disproportionate penalty for breach by the
consumer will be reviewable. Seen in context, the 1993 Directive affords a significant range of
remedies to the consumer. For example, it is arguable that an innocent misrepresentation by a
proposer, which affords an insurer a right of avoidance is itself a disproportionate penalty under
category 6 above, even if the Marine Insurance Act 1906 provides a legislative endorsement of
this common law rule.
(7) The 1995 Regulations and Insurance Adjudications in Ireland
6.34 The Financial Services Ombudsman has not specifically referred to the 1995 Regulations in
any of the Case Studies released on the Ombudsman‘s website. However, general standards of
―fairness‖, ―reasonableness‖, and a desire to avoid inequitable results permeate the Ombudsman‘s
decisions. Two examples from 2009 47 illustrate this point:
An elderly man died of cardiac arrest following a fall. Death benefit was refused on the
basis that the cause of death was a heart attack and the insured event, as stipulated in
the policy, related to a death, the ―sole‖ cause of which was bodily injury. The
Ombudsman held the policy was too strict and narrow, directing the company to review
the wording to ―reduce the risk of unfairness to policyholders‖.
While the Ombudsman upheld the right of a health insurance company to change the
terms of a policy at renewal and adjust the premiums upwards, the introduction of a new
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Joint Consultation Paper 2007: Insurance Contract Law: Misrepresentation, Non-Disclosure and Breach of
Warranty by the Insured, at para 2.94.
R&B Customs Brokers Co Ltd [1988] 1 WLR 321; Smith v Eric S Bush [1990] 1 AC 381; Watford Electronics
Ltd v Sanderson [2001] 1 All ER (Comm) 696.
Bryen & Langley Ltd v Boston [2005] EWCA Civ 973, applied in Maple Leaf Macro Volatility Master Fund v
Rouvroy [2009] EWHC 257 (Comm).
See Case Studies at www.financialombudsman.ie.
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