Insurance Contracts CP - Law Reform Commission

9.25 In the 2008 Report the Commission considered the relationship between the insurable interest
question and the recommendations made in respect of statutory reform of the privity of contract
requirement. In the Report the Commission recommended that the general privity reforms were not to
affect the existing insurable interest requirements but that this recommendation did not ―preclude the
possibility of the future reform of this rule.‖ 37 As this Consultation Paper recommends a broader definition
of insurable interest as well as redrawing the categories of person who may be held to possess such an
interest ie in the context of family and analogous relationships and does not recommend the introduction
of any new insurable interest requirement in other non-life, non-indemnity policies, the statutory reforms
outlined in the 2008 Report will not be in conflict with the insurable interest rules, as reformulated in this
Consultation Paper. 38
F
Recommendations of the Commission in the 2008 Report
9.26 The Commission, in the 2008 Report, suggested that it was undesirable to allow Irish contract
law to retain a privity requirement and that judicial erosion of the doctrine or additional legislative
adjustments were not satisfactory responses to the hardship that the privity doctrine could create.
9.27 In the Report the Commission set forth six guiding principles, four of which were intended to
protect the legitimate interests of contracting parties, while the last two were directed at third party
interests, particularly the expectation interest, and the third parties‘ right to access rights to use
contractual promises in a defensive way (eg rely on an exemption clause). 39 The Commission considers
these six principles to be especially relevant in the context of insurance contracts.
9.28 The Commission, in the 2008 Report, set out three circumstances in which a third party should
be able to directly enforce the provisions in a contract, summarised at paras 3.17 to 3.19:
―3:17 The Commission recommends that a third party should be able to enforce a term of a
contract when the term expressly confers a benefit on the third party. However, the third party
should not be able to enforce the term if it appears on a proper construction of the contract that
the contracting parties did not intend the term to be enforceable by the third party. The
contract should be interpreted in accordance with the ordinary rules of contractual
interpretation, but surrounding circumstances should only be taken into account if they are
reasonably available to the third party.
3.18 The Commission recommends that a third party should be able to enforce a contract or a
term of a contract when the contract expressly states that they may.
3.19 The Commission recommends that a third party should have the right to rely on a term of
a contract which excludes or limits the liability of the third party, provided that was the intention
of the parties. This is subject to the normal statutory and common law rules on the
incorporation and construction of exception clauses.
9.29 Recent English case-law attests to the utility of changing the law. The question whether a
person who is not in a contractual relationship with an insurance broker may nevertheless have a right of
action in tort and/or contract, where the insurance is arranged for that person‘s benefit, was considered in
the English High Court in Crowson v HSBC Insurance Brokers. 40 Crowson was the managing director of
Hughes Brickwork Ltd. The company arranged new liability insurance cover through the defendants.
Liability cover that had been arranged through their previous brokers gave directors and officers liability
37
38
39
40
Report, para 3.124.
This will still make it likely that an insurer will contractually seek to use an insurable interest requirement, as a
matter of contract, to limit the scope of any non-indemnity policy for example. Even though section 16 of the
1984 Act, as amended in 1995 abolishes insurable interest even in life policies, underwriting practice may
require this – see Mann, Annotated Insurance Contracts Act, para. 18.20 cited by Merkin in his Australian
Reverse Transportation Paper at para. 8.7.
Report, paras 2.89-2.95.
[2010] Lloyd‘s Rep IR 441.
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