Insurance Contracts CP - Law Reform Commission

of the term, particularly in the context of a pre-formulated standard contract. The fact that
certain aspects of a term or one specific term have been individually negotiated shall not
exclude the application of this Article to the rest of a contract if an overall assessment of
the contract indicates that it is nevertheless a pre-formulated standard contract. When
an insurer claims that a standard term has been individually negotiated, the burden of
proof in this respect shall be incumbent on the insurer.
(9) Discussion on the Adoption of Article 2:304
6.40 Irish law does not have any statutory provisions that can effectively counteract contractual
provisions that have been included in negotiations or contract documents in an unfair way. While the
common law and the judiciary may strive to protect contracting parties by way of imposing good faith
requirements during the negotiation process, particularly through the rules on incorporation of terms,
there is less room for judicial manoeuvre in cases of substantive unfairness. While clauses may be
subject to hostile interpretation and ambiguities read against an insurer, careful drafting will provide an
insurer with a means of avoiding a claim in some instances. Even though Irish law has a strong tradition
in relation to unconscionable or improvident transactions being overturned, the jurisdiction has not been
employed in the insurance sector. In any event, such equitable doctrines are not appropriate here
because the weaker party will in most cases be seeking to enforce the contract, shorn of the
objectionable provision. Courts of equity do not re-shape unconscionable or improvident transactions, as
a rule.
6.41 The statutory protections available in the Consumer Protection Act 2007 have yet to be tested
in Ireland. It may be that the 2007 legislation, which clearly applies to insurance, may be suitable, but
one cannot be sanguine about this: the Commission considers that an appropriate and tailored response
is necessary. The Óireachtas has already recognised that unfair contractual practices in the insurance
sector exist and that both the Financial Regulator and the Financial Services Ombudsman have important
and distinct roles to play in protecting consumers and small businesses. The Commission believes that
this can be further developed by making the provisions of Directive 93/13/EC fit more appropriately into
Irish commercial law and the Commission believes that the PEICL recommendations provide a very
helpful precedent, one that should be built upon in Ireland.
6.42 It is the view of the Commission, looking at the IIF Codes of Practice, as well as the decisions
of the statutory and non statutory dispute resolution bodies that have effectively provided the legal and
regulatory standards that operate in Irish insurance consumer law, that problems of substantive
unfairness are not commonly found. The Commission believes that most problems arise out of
difficulties, misunderstandings and isolated instances of bad insurance practice. The onus should rest on
the industry to improve training, enhance information gathering and ensure that customers are better
informed about the product they are considering purchasing. By the same token, insureds should read
and make strenuous efforts to understand the cover being provided. Unfair terms legislation, in the
Commission‘s view, is more concerned with ensuring that products are adequately described and that the
insured should obtain the product that is best suited to their requirements. Unfair terms legislation has an
important part to play in matching the buyer with an appropriate product.
6.43 The Commission notes that the Draft Consumer Rights Directive, which was intended to
replace Directive 1993/13/EC, contained a reformulated recital, which in the view of the Commission,
provides greater clarity on what the Judicial Review provisions intend to achieve. Recital 49 of the Draft:
For the purpose of this Directive, neither the fairness of terms which describe the main subject
matter of the contract, nor the quality/price ratio of the goods or services supplied should be
assessed unless these terms did not meet transparency requirements. The main subject
matter of the contract and the price/quality ratio should nevertheless be taken into account in
assessing the fairness of other terms. For example, in insurance contacts, the terms which
clearly define or circumscribe the insured risk and the insurer‘s liability should not be subject to
such an assessment since these restrictions are taken into account in calculating the premium
paid by the consumer.
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