Insurance Contract Law Issues Paper 2 Warranties - Law Commission

More documents

Recommendations

Info

B.32 When faced with disablement cases, the FOS tends to apply the policy term as it stands. It can seem harsh to exclude a complainant from benefit because they could in theory perform another job, even if they stand no realistic prospect of obtaining such a job. However, ombudsmen accept that insurers are commercial entities, and that they have taken on the risk of disablement, not unemployment. As the ombudsman put it in Case 13, An insurer applies different, more stringent criteria for benefit than the state and the thresholds for benefit tend to be higher; after all, insurers are commercial entities that do not have the same social welfare responsibilities as the government. B.33 In these cases, the complainants did not suggest that the policy had been missold, or that the terms of the policy had been ambiguous. Within the industry, there is a well-understood difference between “normal occupation” cover and cover against disablement from any job for which the insured might be suited. These cases, therefore, were not treated as ones in which the ombudsman needed to scrutinise unusual or ambiguous terms. SECURITY REQUIREMENTS B.34 In five cases, the insurer refused to pay a theft claim because the policyholder had not used the required security devices. This was a particular concern in caravan policies, which often contain stringent requirements that the caravan is stored in a secure place. There were three cases where a caravan had been stolen and the insurer alleged a breach of security requirements. B.35 However, the FOS is not sympathetic to security clauses buried in the small print. In all five cases in the survey, the insurer was ordered to pay the claim. Ombudsmen argued that the security requirement was not clearly worded, or was not brought to the consumer’s attention, or was not causally connected to the loss that occurred. B.36 There were several cases in which the ombudsman stressed that if the consumer was required to comply with specific requirements, this must be brought specifically to the consumer’s attention: (1) In Case 43, the policy required that “high value caravans” should have an alarm. The ombudsman held that it was not made sufficiently clear to the complainants that their £9,000 caravan would be classified as high value. It was not enough to include the requirement in the policy document. Instead, such an important term should be brought to the policyholder’s attention before the contract was concluded. (2) In Case 40, the caravan was placed at a caravan site all summer, where the family visited it at weekends and for longer periods. The insurer argued that it was in storage, and should be subject to storage security requirements. The complainants argued it was in recreational use. The ombudsman found that the firm had not done enough to explain the security measures it required. The ombudsman stated that good insurance practice requires that 112
significant definitions, terms and conditions within policy documentation should be clear and unambiguous. Unless an insurer has brought such terms clearly to a policyholder’s attention, I an unlikely to agree that it can rely on them. (3) In Case 30, the policy required that the caravan had to be stored at one of five possible locations – including “another person’s place of residence on condition you have our express written agreement”. The consumer told the insurer that the caravan was stored at a nearby farm, and they noted its address on the policy. However, the insurer argued that this did not constitute express written agreement. The ombudsman held that the policyholder was entitled to believe that the firm had given express written agreement to the location by issuing a policy schedule recording the address. If the firm wanted the policyholder to take additional steps to obtain written agreement, it needed to make this clear before the policy was bought. B.37 There were also suggestions that a claim should not be invalidated for breach of a security warranty unless the breach caused the loss. (1) In Case 42, the complainant claimed for a stolen bicycle, but the firm rejected the claim because at the time of the theft it was not locked to a secure structure. The complainant argued that this would not have made any difference: many bicycles were stolen at the same time, including locked bicycles. The ombudsman ordered the firm to pay the claim, commenting: The <strong>Insurance</strong> Conduct of Business (ICOB) rules state that an insurer should not refuse to meet a claim as a result of a breach of warranty or condition, unless the circumstances of the claim are connected with the breach. Although the firm is relying on an exclusion to reject this claim, it is no different to a warranty in that it requires the complainant to do something to ensure that the cover applies. As I do not believe the lock would have made any difference, I am satisfied that the complainant has provided sufficient evidence to establish that his failure to lock his bicycle was not connected to his claim. (2) In Case 43 (above), the ombudsman noted that the police were called at the time of the theft but were unable to prevent it. Therefore, even if the caravan had been alarmed, it would not have made any difference. The ombudsman argued that “this is an additional reason why the firm should not rely on it in order to repudiate the claim”. B.38 In Case 12, the household policy included a “security warranty”, which stated that there would be no liability under sections 2 and 3 of the policy for loss or damage by theft from the home unless: the security devices fitted to the home are put effectively into operation immediately before you/your family… retire for the night. 113
Page 1 and 2:
Insurance Contract Law Issues Paper
Page 3 and 4:
SPECIFIC UNDERTAKINGS AS TO PAST OR
Page 5 and 6:
Reinsurance 15. Are there any reaso
Page 7 and 8:
Basis of the contract clauses 39 Sp
Page 9 and 10:
PART 1: INTRODUCTION BACKGROUND 1.1
Page 11 and 12:
PART 2: BACKGROUND WHAT IS A WARRAN
Page 13 and 14:
Held covered in case of any breach
Page 15 and 16:
For example, in Farr v Motor Trader
Page 17 and 18:
We recognise that a consequence of
Page 19 and 20:
THE RECOMMENDATIONS 3.3 The 1980 re
Page 21 and 22:
The test in the final report 3.12 F
Page 23 and 24:
3.21 A more recent example is Seddo
Page 25 and 26:
PART 4: ARE WARRANTIES STILL A PROB
Page 27 and 28:
(4) The wording of the warranty doe
Page 29 and 30:
4.12 The “innominate term” clas
Page 31 and 32:
4.23 The 1977 Statement of Long-Ter
Page 33 and 34:
4.34 The Long-Term Statement, howev
Page 35 and 36:
4.42 In Director General of Fair Tr
Page 37 and 38:
Does an exception have to be in pla
Page 39 and 40:
4.60 It is not necessarily sufficie
Page 41 and 42:
4.69 It might be argued that most w
Page 43 and 44:
4.78 However, issues of causal conn
Page 45 and 46:
4.86 Case 14 concerned a critical i
Page 47 and 48:
5.5 In 1980 the Law Commission desc
Page 49 and 50:
5.15 The effect of the Regulations
Page 51 and 52:
Business insurance 5.25 The problem
Page 53 and 54:
PART 6: WARRANTIES IN OTHER JURISDI
Page 55 and 56:
6.10 In a 1982 case, the judge expl
Page 57 and 58:
(b) In the view of the court or arb
Page 59 and 60:
(4) Where the insured proves that s
Page 61 and 62:
6.33 An added twist to these diffic
Page 63 and 64:
6.44 The problems appear where the
Page 65 and 66:
6.53 Soyer argues that on the facts
Page 67 and 68:
6.64 An example will illustrate the
Page 69 and 70: PART 7: PROVISIONAL PROPOSALS 7.1 T
Page 71 and 72: All insurance 7.12 For both consume
Page 73 and 74: 7.20 In the seminar we were asked w
Page 75 and 76: 7.28 The last option is the most ra
Page 77 and 78: 7.37 It would be consistent with th
Page 79 and 80: 7.46 There are two reasons why an i
Page 81 and 82: Other types of clause dealing with
Page 83 and 84: 7.68 We tentatively conclude that t
Page 85 and 86: Our provisional view 7.75 In our vi
Page 87 and 88: 7.85 We think it would be unduly fo
Page 89 and 90: 7.97 Should the causal connection t
Page 91 and 92: 7.105 It has been put to us that a
Page 93 and 94: Legality 7.116 The warranty of lega
Page 95 and 96: 7.127 In 1980 the Law Commission re
Page 97 and 98: Continued liability for premiums FU
Page 99 and 100: 7.148 The question is whether this
Page 101 and 102: 7.157 Often both forms of waiver in
Page 103 and 104: PART 8: AN UNFAIR TERMS APPROACH TO
Page 105 and 106: 8.10 These provisions require the c
Page 107 and 108: (3) In examining whether a term was
Page 109 and 110: APPENDIX A: THE IMPLIED WARRANTIES
Page 111 and 112: A.11 There are some reasons to trea
Page 113 and 114: To nullify a bargain in such circum
Page 115 and 116: Table 1: Type of policy Travel 14 2
Page 117 and 118: B.16 Here a breach of the term does
Page 119: (4) In Case 20, the policy excluded
Page 123 and 124: B.46 Although ombudsmen are unsympa
show all

Insurance Contract Law Issues Paper 2 Warranties - Law Commission

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?