Insurance Contracts CP - Law Reform Commission

This will normally require the insurer to unequivocally communicate to the insured an intention to affirm
the contract: Peyman v Lanjani. 83 Receipt of a premium, even in a case of fraudulent concealment of a
material fact was held to be an act of affirmation in Armstrong v Turquand. 84
(5) The IIF Life Assurance Code of Practice and Ombudsman Adjudications on Non
disclosure
3.55 The Irish Insurance Federation Code of Practice on Life Assurance: Duty of Disclosure
contains a number of important provisions which are intended to direct IIF Members on how the member
is to respond to incidents of non disclosure, misrepresentation and breach of warranty. The Code
addresses precontractual issues and avoidance under three headings, Proposal forms, Policies and
accompanying documents, and Claims.
3.56 Under the code itself, which is confined to policies of life assurance effected in a private
capacity by individuals resident in the Republic of Ireland, a number of provisions are couched in neutral
language. Requirements or obligations under this code are not mandatory: words like ―should‖ and
―may‖ appear to condition the binding nature of the Code particularly in relation to the provisions or
proposal forms and policies accompanying documents. Nevertheless, the Life Assurance Code provides
―best practice‖ benchmarks that could usefully form the basis for future legislation.
3.57 In relation to proposal forms the Life Assurance Code states:
If the proposal form calls for the disclosure of material facts a statement should be included in
the declaration, or prominently displayed elsewhere on the form or in the document of which it
forms part: -
(i) drawing attention to the consequences of failure to disclose all material facts that an insurer
would regard as likely to influence the assessment and acceptance of a proposal;
(ii) warning that if the signatory is in any doubt about whether certain facts are material, these
facts should be disclosed.
3.58 On issues of substance, the Life Assurance Code of Practice seems to suggest that the onus
rests upon insurers to elicit information about material facts from proposers by way of specific questions
in proposal forms, a proposition that is at variance with the traditional view concerning the duty of
disclosure:
In relation to those issues upon which insurers wish to base their underwriting decisions, clear
questions should be included in proposal forms on those matters which have been commonly
found to be material.
3.59 The code also goes on to state that insurers ―will continue to develop clearer and more explicit
proposal forms‖.
3.60 The Life Assurance Code of Practice also contains a very significant limitation on the asking of
questions concerning matters that could be viewed as being within the constructive knowledge of the
proposer. The Code states:
Insurers should avoid asking questions which would require knowledge beyond that which the
signatory could reasonably be expected to possess.
3.61 These provisions are broadly replicated in the IIF Code of Practice on Life Assurance Selling
and in the IIF Code of Practice – Non Life Insurance. While these codes do not appear to be in
widespread circulation any longer, it is arguable that even these limited and legally unenforceable
statements of good practice reflect an awareness on the part of the Insurance Industry that the duty of
utmost good faith requires proposer and insurer to engage in a dialogue and an exchange of information
83
84
[1985] Ch 157.
(1858) 9 ICLR 32. On affirmation generally see Insurance Corporation of the Channel Islands v Royal Hotel
Ltd [1998] Lloyd‘s Rep. IR 151, applied in Persimmon Homes Ltd v Great Lakes Reinsurance (UK) plc [2011]
Lloyd‘s Rep. IR 101, see also Argo Systems FZE v Liberty Insurance PTE Ltd [2011] EWHC 301 (Comm).
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