Insurance Contracts CP - Law Reform Commission

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not only an economic purpose, but also a social purpose. It facilitates commercial enterprise and provides protection to those who suffer harm. By increasing the possible exposure on the part of the insurers may well render risk management and reserving policies problematic and make the cost of insurance inordinately high. Secondly, the insurer is not in fact guilty of a breach of duty or a wrongdoing in causing the insured loss; it has merely agreed to bear the risk of that loss. It would be inappropriate to treat the insurer‘s ―breach‖ in the same way as a party guilty of a breach of duty. Thirdly, the consequential losses are not those which the insurer has agreed to bear under the policy. For example, if a property insurer agrees to indemnify the assured for physical loss of a factory, the financial losses associated with the assured being deprived of the use of that factory does not fall within the insurer‘s remit. Indeed, such losses are specifically insurable. Fourthly, it is unlikely that such consequential losses will satisfy the rules of remoteness, as the additional losses likely to be borne by the assured are based on the latter‘s impecuniosity, which in many cases might not be reasonably foreseeable or in the contemplation of the parties when the contact of insurance is concluded.‖ 96 8.60 The first argument ignores the causal link between late payment of the claim and subsequent damage to the ―commercial enterprise‖, or individual policyholder, as being a sine qua non to recovery of damages, while insurance costs will only increase if insurers process claims inefficiently – these increased costs can be avoided by effective claims handling. The second objection, in Ireland, is beside the point because the law will change to impose a duty upon the insurer as a result of the Commission‘s provisional recommendations. Eggers‘ third objection has some merit but it is the existence of the duty to process claims with all reasonable speed, and the insurer‘s breach of it, that triggers this head of loss. The fourth objection, that damages might not in fact be awarded, the Commission consider to be an argument in favour of making this rather modest adjustment to the law. 8.61 Eggers puts forward a number of arguments that support the view that an insurer, absent fraud, should not be liable for consequential losses. While these are persuasive in some respects it should be noted that Eggers favours a limited duty on the insurer in respect of claims handling because he believes that the duty of good faith is, or should be, the basis of an insured‘s duty not to make fraudulent claims. Indeed, Eggers takes the view that an insurer will be liable if the insurer makes a knowing misrepresentation of fact, and probably of law, in their handling of a claim; this will be a breach of the duty of utmost good faith. Eggers is no doubt correct in making the argument that a fraudulent misrepresentation of this kind is actionable, but it is difficult to see why this forms part of the law on utmost good faith in insurance law, as distinct from actionable misrepresentation in tort. 8.62 In any event, the question of whether consequential losses should be recoverable and the basis of liability are distinct issues. Certainly, if the action is established via fraudulent misrepresentation then all consequential losses will be recoverable as the existing rules on remoteness of damage in deceit now stand. In the case of an insured being able to establish that the claim was not processed by reference to a duty to take all reasonable steps to settle a claim promptly, for example, 97 then such a duty, if cast as contractual, will attract first limb Hadley v Baxendale damages which can of course involve an element of lost profits in any case, and it would require communication of special circumstances for the damages to engage ―second limb‖ Hadley v Baxendale damages. The Commission think that the exposure of insurers to claims for consequential loss, or indeed any kind of loss, is of itself a reason not to retain the existing law if it is unsatisfactory. I Has an insurer a right to damages against the insured? 8.63 Oblique authority for the view that an admission of liability given by an insured, to the prejudice of the insurer, can give rise to liability in damages, can be found in Car and General Insurance 96 97 Ibid Eg Hotel Services Ltd v Hilton International Hotels (UK) Ltd [2000] EWCA Civ 290; GB Gas Holdings v Accenture UK Ltd [2010] EWCA Civ 912 178
Corporation, 98 but ―good faith‖ obligations that are breached by an insured have not attracted damages awards in the English or Irish courts. The same is not true in Canada. Damages awards have been given in favour of insurance companies for an insured‘s breach of the mutual duty of good faith by the Canadian courts. Indeed, these awards cover both compensatory damages and punitive damages. In Andruswi v Aetna Life Insurance Co of Canada 99 a policyholder was ordered to repay $260,000 in disability payments. Because the conduct of the insured constituted a marked departure from the ordinary standards of decent behaviour expected of an insured, censure in the form of punitive damages of $20,000 was regarded as appropriate. J Claims handling: An Alternative Approach? 8.64 The PEICL in Chapter Six, Insured Event, contains a balanced set of recommendations on the mutual duties that should perhaps attach to both the insurer and the insured in respect of claims made following the materialisation of risk. Article 6:101 Notice of insured event (1) The occurrence of an insured event shall be notified to the insurer by the policyholder, the insured or the beneficiary, as appropriate, provided that the person obliged to give notice was or should have been aware of the existence of the insurance cover and of the occurrence of the insured event. Notice by another person shall be effective. (2) Such notice shall be given without undue delay. It shall be effective on dispatch. If the contract requires notice to be to be given within a stated period of time, such time shall be reasonable and in any event no shorter than five days. (3) The insurance money payable shall be reduced to the extent that the insurer proves that it has been prejudiced by undue delay. Article 6:102 Claims Cooperation (1) The policyholder, insured or beneficiary, as appropriate, shall cooperate with the insurer in the investigation of the insured event by responding to reasonable requests, in particular for o o o information about the causes and effects of the insured event; documentary or other evidence of the insured event; access to premises related thereto. (2) In the event of any breach of para. 1 and subject to para. 3, the insurance money payable shall be reduced to the extent that the insurer proves that it has been prejudiced by the breach. (3) In the event of any breach of para. 1 committed with intent to cause prejudice or recklessly and with knowledge that such prejudice would provably result, the insurer shall not be obliged to pay the insurance money. Article 6:103 Acceptance of Claims (1) The insurer shall take all reasonable steps to settle a claim promptly. (2) Unless the insurer rejects a claim or defers acceptance of a claim by written notice giving reasons for its decision within one month after receipt of the relevant documents and other information, the claim shall be deemed to have been accepted. 98 99 [1936] IR 584 (2001) 33 CCLI (3d) 238 (Alta. QB) 179
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CONSULTATION PAPER INSURANCE CONTRA
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MEMBERSHIP The Law Reform Commissio
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ADMINISTRATION STAFF Head of Admini
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ACKNOWLEDGEMENTS The Commission wou
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TABLE OF CONTENTS Table of Key Legi
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CHAPTER 4 (3) Factors covered by an
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(10)Enforcement 149 CHAPTER 7 FORMA
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TABLE OF KEY LEGISLATION Assurance
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Pg No. Economides v Commercial Unio
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Ireland Ltd Pg No. Roselodge Ltd v
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D Regulation and Supervision of Ins
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has been the Consumer Protection Co
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this definition would apply both to
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Commission provisionally recommends
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2005 Final Report and Recommendatio
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in Coleman accords with data protec
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functions may in the future be merg
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estrictions on the ability of the O
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(2) Adverse comments on the propose
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harmonisation of insurance contract
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1.49 Before leaving the general iss
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(2) Decisions of the Financial Serv
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uberrima fidei, regulatory requirem
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1.68 The Commission provisionally r
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2.03 In contrast, a non-indemnity
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CJ expressed the view that it made
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2.18 In the House of Lords, Lord El
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Lord Eldon formulation, 45 overrule
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interest in respect of the property
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drawings themselves, Auld LJ and Si
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the judges to complicate the law by
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Insurance in the UK, Ireland and EU
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any existing doubt, or prevailing m
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(2) A potential financial loss reco
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to the extent of monies actually ex
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took out a life insurance policy on
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2.86 The Commission invites submiss
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and social provision be integrated
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and deny enforceability. The leadin
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(6) Defining Insurance Contracts in
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3 CHAPTER 3 DUTY OF DISCLOSURE A In
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the Ohio case of Hartford Protectio
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the basis that the insurance contra
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that which the signatory could reas
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―(i) In order to be entitled to a
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withholding information on the basi
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public interest in running blockade
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In Manor Park, McMahon J. took a si
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at the precontractual stage. The de
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decisions in which the Ombudsman ha
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(8) The English Law Commission’s
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(10) Australia 3.88 In ALRC Report
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Article 3:103 Exceptions The sancti
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it is desirable to retain the duty;
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B Judicial approaches to limiting a
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will no doubt arise in the future.
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questions that are incapable of a y
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(1) Marine Insurance Act 1906 and m
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(3) Should the right to rescind be
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y English judges to any extent, and
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non-disclosure or misrepresentation
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Factually incorrect answers to a qu
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4.68 While the English and Scottish
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terms to be construed by reference
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conclusion, ―with considerable re
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the present was held not to be prom
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(10) Limiting the scope of the warr
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have been forthright in suggesting
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nature and potentially draconian na
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(b) that even though the loss was o
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whichever is the earlier event. 103
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5.67 Nevertheless, the law reports
Page 148 and 149: may properly consider to be relevan
Page 150 and 151: ―It is easy to sympathise with th
Page 152 and 153: decisions, and case-law, that preve
Page 154 and 155: the terms of the insurance contract
Page 156 and 157: householder each assuming the other
Page 158 and 159: whether in all the circumstances it
Page 160 and 161: may be regarded as technical or unm
Page 162 and 163: ―Basis of contract clauses would
Page 164 and 165: The court may be influenced by the
Page 166 and 167: ―consumer‘s reasonable expectat
Page 168 and 169: of the term, particularly in the co
Page 170 and 171: National Consumer Agency would be t
Page 172 and 173: premium, thus taking the contract o
Page 174 and 175: the Provider could not provide the
Page 176 and 177: exceptions to these requirements in
Page 178 and 179: (l) the existence of guarantee fund
Page 180 and 181: policy should be issued within fift
Page 182 and 183: contains interesting and helpful ad
Page 184 and 185: in the Aro Road case who wrote that
Page 186 and 187: 8.11 The most visible demonstration
Page 188 and 189: common law position relating to sep
Page 190 and 191: F Effects of fraud 8.27 Once the fr
Page 192 and 193: 8.36 In the case of composite insur
Page 194 and 195: (i) consented to the act or omissio
Page 196 and 197: Insurance Corporation of the Channe
Page 200 and 201: Article 6:104 Time of Performance (
Page 202 and 203: B The Problem in Context 9.04 The d
Page 204 and 205: D Exceptions to the Privity Rule (1
Page 206 and 207: 9.20 Because Ireland has not adopte
Page 208 and 209: cover but the defendants failed to
Page 210 and 211: (1) ―Where a person who is not pa
Page 212 and 213: 9.46 The privity doctrine confines
Page 215 and 216: CHAPTER 10 REMEDIES A Introduction
Page 217 and 218: (4) Where the risk would have been
Page 219 and 220: isks‖ policy provided by Royal an
Page 221 and 222: elation to negligent misrepresentat
Page 223 and 224: insurer is seeking to avoid the con
Page 225 and 226: 10.38 The decision of Hirst J in Th
Page 227 and 228: 10.48 The Ontario Court of Appeal,
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Page 231 and 232: G Subrogation - Public Policy Excep
Page 233 and 234: (ii) Subrogation - Employee Liabili
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Page 237 and 238: ―an employer should be liable to
Page 239: Street Dublin against the embezzlem
Page 242 and 243: 11.09 The Commission invites submis
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show all

Insurance Contracts CP - Law Reform Commission

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