Insurance Contracts CP - Law Reform Commission

general, that is, non-life insurance, it would be advisable to stipulate that an otherwise valid contract of
insurance should not be defeated solely because the insured lacks a legal or equitable interest in the
subject matter of the contract of insurance. These two recommendations can stand or fall separately, but
these recommendations beg the question about whether the insurable interest requirement, such as it is,
should remain a part of Irish law.
2.90 A broad approach to this question would start from the position that, at common law, there was
no insurable interest requirement. The 1774 Act, as adopted into Irish law in 1866, has been held only to
apply to life insurance. Property insurance does not require a statutory insurable interest to be shown.
Indemnity insurance contains its own mechanism to control fraudulent claims and over-insurance, that is
the indemnity principle. If the formalities provisions in the 1774 Act remain valid, they should be reenacted
in a modern statute. If gambling is to be regulated, it should be regulated via a gaming statute.
If insurance is to be distinguished from other financial transactions, an insurable interest concept or
requirement is an unsatisfactory way of doing so. In sum, there is no need to retain any insurable interest
requirement.
2.91 In contrast, a narrow approach to the statutory insurable interest requirement would start from
the position that the insurable interest, at least in life policies, remains a useful protection against
gambling or moral hazard, it is in need of reform.
(1) Proposals for Reform – A Broad or Narrow Approach?
2.92 There is a considerable degree of consensus in favour of widening the categories of person
who may be able to assert an insurable interest in relation to the natural love and affection route towards
meeting the insurable interest requirement. As the Law Commissions point out, the New York position
allows a court to rule that any person who has a close relationship, by blood or by law, may thus possess
an insurable interest in another person‘s life. This right extends to the insurance contract being available
for unlimited and stipulated amounts of money, as distinct from being pegged to the insurable interest per
se. The Law Commissions, while mentioning this as a possible approach tentatively inclined towards the
Canadian and previously proposed Australian model of setting out persons in defined relationships.
―We tentatively propose that the following groups should be deemed to have insurable an
interest arising out of natural affection:
(1) any person – in his or her own life and in the life of his or her spouse or civil partner;
(2) any person who is cared for and dependent on his or her parent or guardian – in the life
of his or her parent or guardian;
(3) any parent – in the life of his or her adult child;
(4) any person – in the life of his or her cohabitant.‖ 163
2.93 The Commission considers this proposal to represent a modest and worthwhile restatement
and expansion of the law, reflecting contemporary developments in terms of social policy (eg recognition
of the rights of carers) and the fact that many persons are in cohabitation relationships. However, there
will have to be some attention paid to defining persons in a cohabitating relationship, which the
Commission assumes, is to include same-sex cohabitionship. For this purpose the Commission refers to
the definition of ―cohabitants‖ in the Civil Partnership and Certain Rights and Obligations of Cohabitants
Act 2010, which implemented the key elements of the Commission‘s 2006 Report on the Rights and
Duties of Cohabitants. 164
2.94 A related question that the Law Commissions did not address was the impact that payments
made on the foot of any insurance contract may have in respect of social welfare payments and health
care benefits. Should these payments made under an insurance contract be seen as a collateral benefit
that is to have no impact on social insurance entitlements such as social assistance payments and
medical benefits? Further, if some insurance payments are to have an impact on social welfare or health
care (eg via means tested assessment mechanisms) how should these two systems of private insurance
163
164
Issues Paper 4, para. 7.62.
Law Reform Commission Report on the Rights and Duties of Cohabitants (LRC 82-2006).
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