Insurance Contracts CP - Law Reform Commission

11.19 The Commission provisionally recommends that section 20 of the Marine Insurance Act 1906
should be repealed in relation to consumer insurance and mass market insurance products (including
mass market insurance products to all businesses, not limited to the jurisdictional limit of the Financial
Services Ombudsman); and that the duty in section 20 of the 1906 Act to furnish ―true‖ answers should be
replaced by a duty to answer specific questions honestly and carefully. [Paragraph 4.34]
11.20 The Commission invites submissions as to whether Part V of the Sale of Goods and Supply of
Services Act 1980, which concerns misrepresentation, should be tailored to insurance contracts so as to
provide a remedy in damages in place of recission (repudiation of the insurance contract) in respect of
pre-contractual misrepresentations made by the proposer and the failure to observe the proposed duty of
disclosure in insurance law. [Paragraph 4.46]
11.21 The Commission provisionally recommends that where a proposer has exercised due care and
attention in understanding the questions put and has provided the answers to such questions honestly
and with due care and deliberation, the insurer should not be able to avoid liability on the policy that has
arisen prior to discovery of the innocent misrepresentation. [Paragraph 4.72]
Chapter 5 – Warranties
11.22 The Commission provisionally recommends that the entitlement of an insurer to avoid a policy
or a claim for breach of warranty should depend on whether the insured was provided at the precontractual
stage, or contemporaneously with the conclusion of the contract, with the information required
by the duty of disclosure (as already defined in this Consultation Paper). The Commission provisionally
recommends that, in respect of promissory or continuing warranties that arise after the contract has been
agreed, the insurer must provide the proposer with a clear statement prior to the formation of the contract
about the scope of the continuing obliations imposed upon the proposer when he or she becomes
insured. The Commission invites submissions on how this requirement may best be satisfied, particularly
when the cover is obtained on-line. [Paragraph 5.22 and 5.60]
11.23 The Commission provisionally recommends that statements of fact or opinion shall not be
converted into a contractual warranty by anything stated in the contract, so that ―basis of contract‖
clauses shall be deemed invalid. [Paragraph 5.29 and 5.62]
11.24 The Commission provisionally recommends that breach of a contractual warranty in an
insurance contract should no longer lead to the contract being avoided from the date of breach, but that,
as in other cases of misrepresentation, the contract should be voidable at the option of the person to
whom the misrepresentation was made (and that, to avoid any doubt, it should be provided that section
33(3) of the Marine Insurance Act 1906, which deals with breach of a contractual warranty, is confined to
MAT insurance). [Paragraph 5.58]
11.25 The Commission provisionally recommends that, where an insurer is entitled to avoid an
insurance policy claim for breach of warranty, the insurer should also be free to reject the claim without
repudiating the entire insurance policy. [Paragraph 5.59]
11.26 The Commission provisionally recommends that legislation should provide that a breach of
warranty does not arise in respect of matters of past or present fact where the insured can prove that the
statement was true to the best of his or her knowledge or belief. [Paragraph 5.61]
11.27 The Commission provisionally recommends that where the insured establishes that there is no
causal link between the failure to observe a promissory warranty and the loss the insured should be able
to recover on the claim; and the Commission invites submissions as to whether the failure to observe a
promissory warranty will only lead to the contract being invalidated where the insured has acted
fraudulently (intentionally or recklessly). This provisional recommendation should apply to all insurance
contracts within the terms of the Financial Services Ombudsman jurisdiction, even if the dispute comes
before the courts. In relation to other insurance contracts the Commission invites submissions on
whether a provision of this kind should serve as a default rule in commercial insurance contracts
generally. [Paragraph 5.79]
11.28 The Commission provisionally recommends that legislation should provide that promissory
warranties must be drafted in plain, intelligible language; and that where there is doubt about the meaning
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