Insurance Contracts CP - Law Reform Commission

Article 6:104
Time of Performance
(1) When a claim has been accepted the insurer shall pay or provide the services promised, as
the case may be, without undue delay.
(2) Even if the total value of a claim cannot yet be quantified but the claimant is entitled to at
least a part of it, this part shall be paid or provided with undue delay.
(3) Payment of insurance money, whether under para. 1 or para. 2, shall be made no later than
one week after the acceptance and quantification of the claim or pat of it, as the case may be.
Article 6:105
Late Performance 100
(1) If insurance money is not paid in accordance with Article 6:104, the claimant shall be
entitled to interest on that sum from the time when payment was due t the time of payment and
at the rate applied by the European Central Bank to its most recent main refinancing operation
carried out before the first calendar day of the half-year in question, plus seven percentage
points.
(2) The claimant shall be entitled to recover damages for any additional loss caused by late
payment of the insurance money.
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Recommendation on the duty of utmost good faith
8.65 It is arguable that the universal duty of utmost good faith, if it exists at all, has outlived its
usefulness, both in terms of requiring the proposer to disclose material facts whether prior to or after the
conclusion of the contract. Certainly, the duty is irrelevant to the forfeiture rules governing fraudulent
claims, and the current state of English law requires fraud by an insurer to be shown in relation to claims
handling by an insurer if liability is to result. Why fraud should require to be dressed up in a breach of
good faith argument as distinct from simply being actionable in the tort of deceit is not immediately
apparent. The Commission considers that the law would not be any less effective if in Carter v Boehm
Lord Mansfield had limited the duty to pre-contractual disclosure.
8.66 The Commission considers that existing forfeiture of fraudulent claims case-law, as it has
developed provides a generally satisfactory approach to what the Commission considers to be ―bad faith‖
processing of claims by insurers. The same cannot be said for the law relating to possible ―bad faith‖
processing of claims by insurers and the Commission favour the development of a more balanced
bilateral/mutual approach to claims handling in the way sketched out in the PEICL, Article 6.
8.67 This leaves open the question whether ―utmost good faith‖ should be retained as a guiding
principle of Irish insurance contract law once the contract has been concluded. The Commission
envisage that if Article 6 of PEICL is adopted, most practical problems will be addressed therein. But the
good faith principle will remain, as an aid to interpretation of the contract. It is possible to envisage
disputes emerging in which a court might consider that an insurer might be under a good faith obligation
(eg a duty to warn an insured that, based on specific facts known to that insurer alone, a risk is more
likely to materialise than was previously thought to be the case).
8.68 The Commission provisionally recommends that legislation should set out the mutual duties on
the insured and the insurer in respect of claims handling, so that the principle of good faith would then
remain relevant only to pre-contractual formation of the contract and as an aid to interpretation.
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This Article is modelled on Article 3 para. 1 (d) Directive 2000/35/EC.
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