Insurance Contracts CP - Law Reform Commission

More documents

Recommendations

Info

(2) A potential financial loss recognised by law which existed at the time of contracting 2.71 At the present time the insurable interest must be recognised by law and the interest that is recognised is limited to the interest that is so recognised. A creditor is thus entitled to insure the life of a debtor and where two persons buy a house on a joint and several basis for the mortgage debt, each person is able to insure the life of the other to cover the whole of the mortgage debt. As the English and Scottish Law Commissions point out, this category of insurable interest is problematical, firstly because the financial loss test, defined as a pecuniary interest that is capable of valuation, is difficult to define and excludes general considerations such as ―reasonable expectation‖, as distinct from an enforceable legal entitlement. Secondly, the Law Commissions highlight the difficulty in recovering the sums insured when the courts incline towards giving the insured the amount lost rather than the value of the interest on the life assured, as of the date the policy was taken out. Thirdly, should the insured recover the sum of his/her loss (eg via a separate policy of insurance) this will exhaust the entitlement: Hebden v West. 113 The most important practical consequence of this restrictive category arises in relation to employee/employer and key employee insurance taken out by an employer. (3) Statutory obligations 2.72 There are relatively few examples of this category in Irish statute law. The Married Women‟s Status Act 1882, s.11 provides that a policy of insurance taken out by a husband or wife, for the benefit of his/her spouse or children, creates a statutory trust and the benefits are payable directly to the beneficiary. There are also judicial decisions that overlap on this issue. A husband may have an insurable interest in his wife‘s property, to the extent that the parties to the marriage live together and use that property. Should the husband become insolvent and some chattels be removed from property that ought to be available to satisfy his creditors, that may be a fraud upon his creditors but will not prevent an insurable interest arising: Goulstone v The Royal Insurance Company. 114 Conversely, Lord Kenyon, in Reed v Royal Exchange Assurance Company 115 remarked that it is not necessary to show an insurable interest is held by a wife in her husband‘s property ―as it must be presumed that the plaintiff [wife] was interested in his life.‖ 116 The Married Women‟s Property Act 1882 has proved an enduring precedent. Section 11 of the Act provided that a policy of insurance effected by a man or woman on his/her own life, and expressed to be for the benefit of his/her husband/wife or of their children is to create a trust in favour of those objects; the monies payable are not to form a part of the estate of the insured so long as any object of the trust remains unperformed. Case-law suggests that section 11 often produced litigation over the identity of the beneficiary (eg Prescott v Prescott) 117 and many judicial utterances are directed at the privity of contract problem rather than that of insurable interest. 118 Section 11 was replaced by section 7(1) of the Married Women‟s Status Act 1957, providing that a trust could arise in relation to a life assurance or endowment policy expressed to be for the benefit of, or by its express terms purporting to confer a benefit on, a wife, husband or child of the insured. Section 7(8) defined a child so as to include a stepchild, illegitimate child, adopted person or person to whom the insured stands in loco parentis. 2.73 The logic of the 1882 and 1957 legislation is clear: children or surviving spouses should have a source of income, to be provided out of private insurance. Whether this rationale is intelligible within the context of State welfare provision for adult and child dependants may be an open question, but there is no doubt that the failure of the legislature to allow adult children to be the subject of insurance cover so as to facilitate direct financial provision for the healthcare and maintenance requirements of elderly parents by private insurance is most unfortunate. While the law will already enable a parent to benefit from a life policy taken out by an adult child by way of assignment it would be preferable to facilitate direct provision 113 114 115 116 117 118 (1863) 3 B & S 579. This case is considered below at M, Valuation Difficulties, para 2.85 (1858) 1 F & F 276. (1795) Peake Add Cas 70. See MacGillivray paras. 1.066 to 1.069. [1905] 1IR 156, following In Re Adams Policy Trusts (1883 ) L3 ChD 525. See also In Re O‟Donnell [1968] NI 52. Eg Cleaver v Mutual Reserve Fund Life Association [1892] 1QB 147 per Lord Esher at 152. 48
insurance contracts, not least because the insurance industry would be encouraged to develop new insurance products that would address the health care and maintenance needs of ―the objects‖, to use the language of the 1882 legislation. (4) The Miscellaneous Category 2.74 This category exists in English law as a result of Waller LJ‘s speech in Feasey v Sun Life Assurance of Canada. 119 This decision has not been considered by an Irish court and it has been doubted by English commentators. The existence of this category can be said to arise out of the inconvenience of an insurable interest requirement and how it may obstruct otherwise unobjectionable contractual arrangements in a commercial setting. Rather than heaping an exception onto an exception, it would be better to reform or even repeal the insurable interest requirement altogether. (5) The limits of natural love and affection 2.75 The leading cases on the absence of natural love and affection being insufficient to create an insurable interest as between a parent and child generally revolve around old poor law maintenance and burial obligations, the effect of which is often to supplant arguments about legal support and contractual consideration. In Ireland, decisions such as Farrington v Donoghue 120 and Pordage v Canter 121 demonstrate that statutory obligations to support children born outside marriage were imposed upon mothers, but not fathers. Current Irish legislation imposes support obligations horizontally on parents: Social Welfare Consolidation Act 2005, section 345. However, in circumstances where a parent takes out insurance on the life of an adult child the weight of authority stands against an insurable interest being made out. In Halford v Kymer 122 a father took out a policy of insurance on the life of his son. The issue was whether the policy could be enforced on the basis that the chance that the father might be supported by his son in his old age afforded an insurable interest. Bayley J said of the father that ―the parish is bound to maintain him, and it is indifferent to him whether he be maintained by the parish or his own son.‖ 123 Recent English authority has cast some doubt on this case, Waller LJ, in Feasey v Sun Life Assurance Co of Canada and others 124 remarking that ―one wonders whether the same decision would be reached in the modern era.‖ 125 The fact that many of the cases appear to involve collusive acts by proposers and agents of the insurer (albeit agents with limited capacity) or even instances of innocent and ignorant persons being duped by insurance agents, was allowed to speak to the recovery of premiums paid by the in pari delicto rule but not the enforceability of the underlying contract. There are isolated cases however where the courts were prepared to allow family members to bargain for support obligations by analogy with creditor and debtor transactions. Case-law sometimes permitted recovery on a policy where a family member may have a legal duty to maintain another family member. In Barnes v London, Edinburgh and Glasgow Life Insurance Company 126 the plaintiff promised her mother to maintain a 10-year-old child, the promisor‘s step-sister; the evidence indicated that the plaintiff had commenced to perform her promise, taking out a life policy on the child. A self-imposed duty of this kind permitted the promisor to secure the repayment of the expenses incurred. Lord Coleridge CJ remarked that obligations of the sort undertaken by the promisor ―were obligations the repayment of which was habitually secured in this way.‖ Both the Chief Justice and AL Smith J regarded the promisor as having an insurable interest 119 120 121 122 123 124 125 126 [2003] EWCA Civ.885. See MacGillivray generally in Ch.1. Templeman, op cit at p.200 describes Feasey as commercially sensible but a legally doubtful decision as it recognises a pecuniary interest as sufficing to satisfy the 1774 statute. (1866) IR 1 CL 657. (1854) Ir Jus Rep (05) 246. (1830) 10 B&C 724. (1830) 10 B & C 724 at 730. [2003] EWCA Civ.885. Ibid, para 83. [1892] 1 QB 864. This case has been criticised in later English proceedings, discussed in the 2008 Insurable Interest Issues Paper 4 at para 3.14, footnote 8. 49
Page 1 and 2:
CONSULTATION PAPER INSURANCE CONTRA
Page 3 and 4:
MEMBERSHIP The Law Reform Commissio
Page 5 and 6:
ADMINISTRATION STAFF Head of Admini
Page 7 and 8:
ACKNOWLEDGEMENTS The Commission wou
Page 9 and 10:
TABLE OF CONTENTS Table of Key Legi
Page 11 and 12:
CHAPTER 4 (3) Factors covered by an
Page 13 and 14:
(10)Enforcement 149 CHAPTER 7 FORMA
Page 15:
TABLE OF KEY LEGISLATION Assurance
Page 18 and 19: Pg No. Economides v Commercial Unio
Page 20 and 21: Ireland Ltd Pg No. Roselodge Ltd v
Page 22 and 23: D Regulation and Supervision of Ins
Page 24 and 25: has been the Consumer Protection Co
Page 26 and 27: this definition would apply both to
Page 28 and 29: Commission provisionally recommends
Page 30 and 31: 2005 Final Report and Recommendatio
Page 32 and 33: in Coleman accords with data protec
Page 34 and 35: functions may in the future be merg
Page 36 and 37: estrictions on the ability of the O
Page 38 and 39: (2) Adverse comments on the propose
Page 40 and 41: harmonisation of insurance contract
Page 42 and 43: 1.49 Before leaving the general iss
Page 44 and 45: (2) Decisions of the Financial Serv
Page 46 and 47: uberrima fidei, regulatory requirem
Page 48 and 49: 1.68 The Commission provisionally r
Page 50 and 51: 2.03 In contrast, a non-indemnity
Page 52 and 53: CJ expressed the view that it made
Page 54 and 55: 2.18 In the House of Lords, Lord El
Page 56 and 57: Lord Eldon formulation, 45 overrule
Page 58 and 59: interest in respect of the property
Page 60 and 61: drawings themselves, Auld LJ and Si
Page 62 and 63: the judges to complicate the law by
Page 64 and 65: Insurance in the UK, Ireland and EU
Page 66 and 67: any existing doubt, or prevailing m
Page 70 and 71: to the extent of monies actually ex
Page 72 and 73: took out a life insurance policy on
Page 74 and 75: 2.86 The Commission invites submiss
Page 76 and 77: and social provision be integrated
Page 78 and 79: and deny enforceability. The leadin
Page 80 and 81: (6) Defining Insurance Contracts in
Page 83 and 84: 3 CHAPTER 3 DUTY OF DISCLOSURE A In
Page 85 and 86: the Ohio case of Hartford Protectio
Page 87 and 88: the basis that the insurance contra
Page 89 and 90: that which the signatory could reas
Page 91 and 92: ―(i) In order to be entitled to a
Page 93 and 94: withholding information on the basi
Page 95 and 96: public interest in running blockade
Page 97 and 98: In Manor Park, McMahon J. took a si
Page 99 and 100: at the precontractual stage. The de
Page 101 and 102: decisions in which the Ombudsman ha
Page 103 and 104: (8) The English Law Commission’s
Page 105 and 106: (10) Australia 3.88 In ALRC Report
Page 107 and 108: Article 3:103 Exceptions The sancti
Page 109: it is desirable to retain the duty;
Page 112 and 113: B Judicial approaches to limiting a
Page 114 and 115: will no doubt arise in the future.
Page 116 and 117: questions that are incapable of a y
Page 118 and 119:
(1) Marine Insurance Act 1906 and m
Page 120 and 121:
(3) Should the right to rescind be
Page 122 and 123:
y English judges to any extent, and
Page 124 and 125:
non-disclosure or misrepresentation
Page 126 and 127:
Factually incorrect answers to a qu
Page 128 and 129:
4.68 While the English and Scottish
Page 130 and 131:
terms to be construed by reference
Page 132 and 133:
conclusion, ―with considerable re
Page 134 and 135:
the present was held not to be prom
Page 136 and 137:
(10) Limiting the scope of the warr
Page 138 and 139:
have been forthright in suggesting
Page 140 and 141:
nature and potentially draconian na
Page 142 and 143:
(b) that even though the loss was o
Page 144 and 145:
whichever is the earlier event. 103
Page 146 and 147:
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 198 and 199:
not only an economic purpose, but a
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,
Page 229 and 230:
(a) An insurer cancelled a motor in
Page 231 and 232:
G Subrogation - Public Policy Excep
Page 233 and 234:
(ii) Subrogation - Employee Liabili
Page 235 and 236:
Employee‟s Liability (Indemnifica
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
Page 244 and 245:
of a promissory warranty, it should
show all

Insurance Contracts CP - Law Reform Commission

Create successful ePaper yourself

Delete template?

Save as template?