Insurance Contracts CP - Law Reform Commission

that which the signatory could reasonably be expected to possess‖, suggesting that insurers may seek to
extend s.18(1) beyond business insurers. The Commission considers that judicial decisions after Aro
Road satisfactorily resolve these problems in the light of the flexibility of the disclosure test. Indeed, the
Commission notes that because Aro Road was written as a marine insurance policy, the Supreme Court
may well have confined s.18(1) to issues of ―wilful ignorance‖ in any event. The Commission concludes
that a proposer will be in breach of the pre-contractual duty of disclosure where it can be shown that the
proposer, in applying for insurance cover, remained wilfully ignorant to material facts or circumstances.
This is in line with the decison of the UK Court of Appeal in Economides v Commercial Union 30 where
―failing to disclose what he would have seen if only he had opened his eyes‖ was seen as an example of
actual knowledge and not constructive knowledge.
3.22 The Commission provisionally recommends that the pre-contractual duty of disclosure in
insurance contract law should be retained, but that it should (in accordance with authoritative case law in
Ireland) be restricted to facts or circumstances of which the person applying for insurance cover – the
proposer – has actual knowledge; and that the duty of disclosure would not, therefore, extend to every
fact or circumstance which ought to be known by him or her (constructive knowledge). The Commission
also provisionally recommends that this modified pre-contractual duty of disclosure shall apply to all
insurance, other than Marine, Aviation and Transport (MAT) insurance, which would continue to be
regulated in this respect by the Marine Insurance act 1906.
3.23 It is of interest to note that the leading English text, MacGillivray on Insurance Law, cites
Chariot Inns as articulating ‗the common law test of materiality‘ 31 while the Aro Road decision is not cited
anywhere in the current edition. This difference in perspective clearly holds forth the prospect of an Irish
court being able to limit the duty of disclosure, in circumstances where the underwriter seeks to provide
cover without assisting the proposer in being made fully aware of the existence and scope of the duty
itself. As such, Irish law may not be open to the same level of criticism that Professor Malcolm Clarke
has levied against English law:
―Applicants in England may complete the form with scrupulous care, but still find that there was
something else material to prudent insurers which, apparently, the particular insurer did not
think to ask about but which, nonetheless, the applicant was expected to think of and
disclose.‖ 32
3.24 Evidence of materiality may be put before the court from a number of directions. Expert
witnesses who are engaged in the insurance business and other relevant professionals such as medical
practitioners in respect of life assurance, for example, may be expected to provide assistance to the
court. MacGillivray states that:
Expert evidence on the materiality of undisclosed facts ought to be admitted whenever it is the
usual practice of insurers to be guided by the opinions of that class of experts whose evidence
is offered in the case in question.‖ 33
3.25 However, the question whether a fact is material or not rests upon the courts as the trier of fact.
In Aro Road the Supreme Court overruled Carroll J at first instance when deferring to the opinion of
expert witnesses on materiality, and a healthy degree of caution is often demonstrated by judges in
relation to issues of moral hazard in particular. Roselodge Ltd v Castle 34 and Aro Road itself provide
good examples. The court will require the expert witness to indicate that the fact would be material in the
sense that it would influence the decision to take on the risk, and on what terms, or affect the rate of the
30
31
32
33
34
[1997] 3 All ER 636.
MacGillivary, Insurance Law, 11 th ed (Sweet & Maxwell 2008), para 17-035.
Observation quoted in the Law Commission‘s 2007 Consultation Paper at para 2.37.
Para 17-043.
[1966] 2 Lloyds Rep. 113. McNair J rejected evidence on a moral hazard issue from two experts on the basis
of the extreme views these witnesses had expressed during cross-examination.
69