Insurance Contracts CP - Law Reform Commission

premium. Evidence that the prudent insurer, if notified that the proposer was suffering from a heavy cold
would have led to suspension of a policy was held not material in Harney v Century Insurance 35
3.26 The Commission has suggested above that in certain circumstances Irish courts have relaxed
the duty in recent years. Even if this is so, the boundaries of the duty of disclosure in Irish law are not
coherently set out by Irish case-law. The Commission considers that, insofar as the outcome of a case
may turn on whether a proposal form was or was not used, as set out in Aro Road, the Irish courts have
provided an invaluable starting point, but that a thorough and systematic overhaul of Irish insurance
contract law can best be achieved through legislation. In this context, the Commission considers that
these adjustments should recognise that the principle of utmost good faith and the duty of disclosure are
complementary to one another in most cases. The Commission thus considers that Irish law should
reflect the approach to the good faith principle set out by McCarthy J in Aro Road and Keating and by
McMahon J in Manor Park Homebuilders.
3.27 The Commission provisionally recommends that legislation should continue to provide that,
because the proposer possesses more relevant information than the insurer, the pre-contractual duty of
disclosure should continue to be the basis on which a contract of insurance is a contract of utmost good
faith.
3.28 The Commission provisionally recommends that legislation should provide that, in respect of all
contracts of insurance, an insurer shall not be permitted to repudiate liability on the basis of nondisclosure
of material facts of which the insured could not reasonably be expected to have actual
knowledge at the time of applying for cover.
D
Materiality and Inducement
3.29 In Pan Atlantic Insurance Co. Ltd v Pine Top Insurance Co. Ltd 36 the UK House of Lords
adopted an inducement test that sits alongside the traditional prudent insurer test for materiality. Thus, to
quote from Lord Mustill‘s speech, a judgement which is generally regarded as being the most
authoritative:
―...there is to be implied in the [Marine Insurance Act 1906] a qualification that a material
misrepresentation will not entitle the underwriter to avoid the policy unless the
misrepresentation induced the making of the contract, using ‗induced‘ in the sense in which it is
used in the general law of contract.‖ 37
3.30 The Marine Insurance Act 1906 does not contain any inducement test and, prior to Pan Atlantic
there was no clear view in England on the issue of inducement. Indeed, even experienced insurance
judges in England had no clear settled view on this point, Sir Michael Kerr in particular having famously
changed his mind on this question. 38 The English law on inducement has been recently summarised by
Clarke LJ as follows: 39
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36
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39
Harney v Century Insurance Co [1983] IEHC 16, applying Mutual Life Insurance Co of New York v Ontario
Metal Products [1925] AC 344. Mutual Life itself was a central prop in Lord Lloyd‘s argument in Pan Atlantic
Insurance Co. Ltd v Pine Top Insurance Co. Ltd [1994] 3 All ER 581 at 632 that the ―decisive influence‖ test
represented English law.
[1994] 3 All ER 581.
Ibid, at p 617; see also St Paul Fire and Marine Insurance Co (UK) v McConnell Dowell Constructors Ltd
[1996] 1 All ER 96 and Drake Insurance plc v Provident Insurance plc [2004] QB 601.
Berger v Pollock [1973] 2 Lloyds Rep 442 at 463, repudiated in Container Transport International Inc v
Provident Insurance plc [1984] Lloyd‘s Rep. 476. In Pan Atlantic Lord Mustill observed that Kerr J‘s instinct in
Berger v Pollock “was right”.
Assicurazioni Generali Spa v Arab Insurance Group [2003] 1 WLR 577 followed in Laker Vent Engineering v
Templeton Insurance Ltd [2009] 2 All ER (Comm) 755.
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