Insurance Contracts CP - Law Reform Commission

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and social provision be integrated with each other? The Commission has previously considered these questions from the perspective of how to integrate considerations of legal principle with social justice and social solidarity: see the Commission‘s 2002 Report on Section 2 of the Civil Liability (Amendment) Act 1964. 165 The Commission appreciates that our recommendation that an insurable interest is to vest in cohabitants raises a number of issues that must be considered in broader socio-economic terms but that such considerations go way beyond the ambit of this Consultation Paper. 2.95 The Law Commissions, in Issues Paper 4, also invited submissions on what should be done in respect of other relationships, in particular: ―(1) should parents have an interest in the lives of their children under 18? (2) should fiancé(e)s have interests in each other‘s lives? (3) should siblings have interests in each other‘s lives? (4) should grandparents and grandchildren have interests in each other‘s lives?‖ 166 2.96 The fact that these relationships have been separated from the position pertaining or proposed by the Law Commissions in respect of spouses or civil partners, persons cared for and dependant on a parent or guardian, parents and adult children, and cohabitees, tends towards an implicit assumption that siblings, for example, are less likely to be in close or supportive relationships than a married couple. While this may be so in many cases, it is just as foreseeable that two unmarried brothers may form a dependant relationship that could render some insurance arrangement a prudent and socially desirable step for them to take. Whether the moral hazard – the possibility that one family or blood relative might take the life of another for financial gain – is stronger as between married persons than siblings is presumably a matter of idle speculation but any actuarial information on this and other matters would be welcome. 167 2.97 The Commission provisionally recommends that, in connection with life insurance, the following should also be deemed to have an insurable interest in the life policy: (a) spouses in relation to each other; (b) civil partners in relation to each other; (c) cohabitants in relation to each other; (d) a child in relation to his or her parent or guardian; and (e) a dependant parent in relation to his or her adult child. 2.98 The Commission invites submissions as to whether, in connection with life insurance, the following should also be deemed to have an insurable interest in the life policy: (a) a grandparent in relation to his or her grandchild; and (b) siblings in relation to each other. (2) Non Indemnity Insurance and the Insurable Interest 2.99 Non indemnity insurance, that is insurance which pays a fixed sum upon the risk materialising, is generally associated with life policies but property insurance of many kinds is also effected on a non indemnity basis. As Irish law does not currently contain an insurable interest requirement, the 1774 Act not applying outside the area of life cover, an argument would have to be made for legislating for the introduction of an insurable interest requirement to be introduced in non indemnity, non life insurance. The only basis upon which such an argument can proceed revolves around either that of moral hazard/deterrence, or public policy considerations that proscribe gambling. In the Commission‘s view, neither of these considerations necessitate the introduction of an insurable interest requirement where it does not currently exist. (3) Moral hazard/deterrence 2.100 The argument that an insurance claim should only be honoured when the claimant can show an insurable interest in order to deter fraud, or moral hazard, does not make very much sense. The arsonist who has no interest in a property but who has an insurance policy in relation to that property might fall under a greater degree of suspicion than any householder or property owner who has such an 165 166 167 Law Reform Commission Report on Section 2 of the Civil Liability (Amendment) Act 1964 (LRC 68-2002). Issues Paper 4, para. 7.64. The Law Commissions in their recently published Joint Consultation Paper 2011: Post Contractual Duties and Other Issues, support broadening the categories of persons who may insure the life of another. 56
interest. Furthermore, the liberal interpretation placed upon the requirement in some of the pre Church and General Insurance Co v Connolly 168 decisions such as Brady v Irish Land Commission 169 and Coen v Employers Liability Assurance Co 170 suggests that, as a threshold test, there is no effective purpose to be served by insisting upon an insurable interest requirement; illegality, and fraud are more likely to constitute effective barriers to an improperly constituted insurance claim. The Commission believes that legislation directed at preventing criminals from profiting form criminal acts such as the Proceeds of Crime Act 1996 171 and the Criminal Justice (Theft and Fraud Offences) Act 2001 172 represent a more direct and effective means of dissuading persons from engaging in criminal activity, while at the same time allowing due process to be observed. 173 Similar considerations suggest to the Commission that Irish Society is less concerned with the distinction between gaming and wagering on the one hand, and insurance and other financial products on the other. The National Lottery, scratch cards, on-course and off-course betting on horses and greyhounds, as well as the explosion in spread betting and betting exchanges suggest that the issue is not whether to facilitate such activities as a part of the leisure industry; rather, the question is how best to regulate activities that often straddle the boundary between recreational wagering and financial investment activities. This question goes beyond the scope of the current analysis of insurance contract law. Nevertheless the Commission does not see any case for introducing an insurable interest requirement (in the traditional Macaura sense) in non-indemnity insurance that does not involve life insurance. 2.101 It certainly is arguable that the Life Assurance Act 1774 no longer serves any useful purpose. As the Australian Law Reform Commission graphically put it: ―The legislative requirements relating to the interest which an insured must have in the subject matter of an insurance contract are the result of a combination of imprecise drafting and historical accident rather than coherent implementation of clear legislative policy... Even in 1774, there was no reason why that Act should extend to contracts of indemnity, since the nature of such a contract prevents gaming and wagering in the form of insurance.‖ 174 2.102 The Gaming Act 1845, 175 which was repealed and replaced by the Gaming and Lotteries Act 1956, provided the most obvious means of counteracting wagering contracts that were dressed up as insurance transactions, and although the 1956 legislation is generally regarded as in need of root and branch reform, the provision in section 36(1), which provides that every contract by way of gaming or wagering is void, still can provide a sound basis for regulating the boundary between wagering and insurance contracts under Irish law. 2.103 In Byers v Beattie 176 Shares were purchased by the plaintiffs on the foot of an agreement that if a resale was effected on disadvantageous terms, the plaintiffs would be entitled to the difference and commission and other charges from the defendant. The transaction was held to be void as a wager. Even where an insurable interest is evident, the Irish courts are able to identify undesirable transactions 168 169 170 171 172 173 174 175 176 High Court, 7 May 1981. See MacGillivray, para. 1.-044 for the contrasting British position. [1921] 1 IR 56. [1962] IR 314. Section 2 (interim orders), as amended by the Proceeds of Crime (Amendment) Act 2005. For example, section 6 (making a gain or causing a loss by deception). Contrast the situation where the insurer declines to honour a policy merely upon suspicion of fraud or destruction of property by the insured. Both the Insurance Ombudsman of Ireland and the Financial Services Ombudsman have held such powers to be incompatible with the Constitution of Ireland: see the discussion below. ALRC Report 1982, para 117. 8 & 9 Vict,. c.109. The Gaming and Lotteries Act 1956 also repealed the Gaming Act 1892, re-enacting the terms of s.1 of the 1892 Act in section 36(1). For a recent decision on restitutionary remedies being available notwithstanding s.1 of the 1892 Act, see Close v Wilson [2011] EWCA Civ 5. (1870) IR 1 CL 209; Morgan Grenfell & Co v Welwyn Hatfield District Council [1995] 1 All ER 1. 57
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CONSULTATION PAPER INSURANCE CONTRA
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MEMBERSHIP The Law Reform Commissio
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ADMINISTRATION STAFF Head of Admini
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ACKNOWLEDGEMENTS The Commission wou
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TABLE OF CONTENTS Table of Key Legi
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CHAPTER 4 (3) Factors covered by an
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(10)Enforcement 149 CHAPTER 7 FORMA
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TABLE OF KEY LEGISLATION Assurance
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Pg No. Economides v Commercial Unio
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Ireland Ltd Pg No. Roselodge Ltd v
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D Regulation and Supervision of Ins
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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 68 and 69: (2) A potential financial loss reco
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 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
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Factually incorrect answers to a qu
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4.68 While the English and Scottish
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terms to be construed by reference
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conclusion, ―with considerable re
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the present was held not to be prom
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(10) Limiting the scope of the warr
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have been forthright in suggesting
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nature and potentially draconian na
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(b) that even though the loss was o
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whichever is the earlier event. 103
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5.67 Nevertheless, the law reports
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may properly consider to be relevan
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―It is easy to sympathise with th
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decisions, and case-law, that preve
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the terms of the insurance contract
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householder each assuming the other
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whether in all the circumstances it
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may be regarded as technical or unm
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―Basis of contract clauses would
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The court may be influenced by the
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―consumer‘s reasonable expectat
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of the term, particularly in the co
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National Consumer Agency would be t
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premium, thus taking the contract o
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the Provider could not provide the
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exceptions to these requirements in
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(l) the existence of guarantee fund
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policy should be issued within fift
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contains interesting and helpful ad
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in the Aro Road case who wrote that
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8.11 The most visible demonstration
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common law position relating to sep
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F Effects of fraud 8.27 Once the fr
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8.36 In the case of composite insur
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(i) consented to the act or omissio
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Insurance Corporation of the Channe
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not only an economic purpose, but a
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Article 6:104 Time of Performance (
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B The Problem in Context 9.04 The d
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D Exceptions to the Privity Rule (1
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9.20 Because Ireland has not adopte
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cover but the defendants failed to
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(1) ―Where a person who is not pa
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9.46 The privity doctrine confines
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CHAPTER 10 REMEDIES A Introduction
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(4) Where the risk would have been
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isks‖ policy provided by Royal an
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elation to negligent misrepresentat
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insurer is seeking to avoid the con
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10.38 The decision of Hirst J in Th
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10.48 The Ontario Court of Appeal,
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(a) An insurer cancelled a motor in
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G Subrogation - Public Policy Excep
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(ii) Subrogation - Employee Liabili
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Employee‟s Liability (Indemnifica
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―an employer should be liable to
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Street Dublin against the embezzlem
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11.09 The Commission invites submis
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of a promissory warranty, it should
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Insurance Contracts CP - Law Reform Commission

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