Insurance Contract Law Issues Paper 2 Warranties - Law Commission

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CONTENTS PART 1 : INTRODUCTION 1 Background 1 Status of issues papers 1 Our objectives 1 The structure of this paper 2 PART 2 : BACKGROUND 3 What is a warranty? 3 A hierarchy of terms 6 Basis of the contract clauses 7 PART 3: THE LAW COMMISSION'S 1980 REPORT 10 Identifying the problems 10 The recommendations 11 Why just warranties? A problem with the 1980 report 13 PART 4: ARE WARRANTIES STILL A PROBLEM? ALTERNATIVE METHODS OF PROTECTION 17 The construction approach 17 The ABI Statements of Practice and FSA rules 22 Unfair terms in consumer contracts: the 1993 Directive and 1999 Regulations 26 The Financial Ombudsman Service 34 PART 5: EVALUATION OF THE PRESENT POSITION 38 Introduction 38 i
Basis of the contract clauses 39 Specific warranties of fact or future conduct: 40 PART 6 : WARRANTIES IN OTHER JURISDICTIONS 45 Australia and New Zealand 45 Canada 55 The USA 57 Civil law jurisdictions 58 PART 7 : PROVISIONAL PROPOSALS 61 Our tentative proposals on misrepresentation and non-disclosure 62 Warranties of past or existing fact 66 Warranties as to the future: a written statement 73 Requiring a connection between the breach and the loss 74 Other types of clause 78 Should the reforms apply to marine, aviation and transport insurance? 81 Should the reforms apply to reinsurance? 86 Reforming other provisions of the MIA 1906 87 PART 8: AN UNFAIR TERMS APPROACH TO COMMERCIAL INSURANCE? 95 The Unfair Contract Terms Act 1977, sections 3 and 17 96 The arguments for extension 98 The arguments against extension 99 Conclusion 100 ii
Page 1 and 2: Insurance Contract Law Issues Paper
Page 3 and 4: SPECIFIC UNDERTAKINGS AS TO PAST OR
Page 5: Reinsurance 15. Are there any reaso
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
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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
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All insurance 7.12 For both consume
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7.20 In the seminar we were asked w
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7.28 The last option is the most ra
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7.37 It would be consistent with th
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7.46 There are two reasons why an i
Page 81 and 82:
Other types of clause dealing with
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7.68 We tentatively conclude that t
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Our provisional view 7.75 In our vi
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7.85 We think it would be unduly fo
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7.97 Should the causal connection t
Page 91 and 92:
7.105 It has been put to us that a
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Legality 7.116 The warranty of lega
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7.127 In 1980 the Law Commission re
Page 97 and 98:
Continued liability for premiums FU
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7.148 The question is whether this
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7.157 Often both forms of waiver in
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PART 8: AN UNFAIR TERMS APPROACH TO
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8.10 These provisions require the c
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(3) In examining whether a term was
Page 109 and 110:
APPENDIX A: THE IMPLIED WARRANTIES
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A.11 There are some reasons to trea
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To nullify a bargain in such circum
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Table 1: Type of policy Travel 14 2
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B.16 Here a breach of the term does
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(4) In Case 20, the policy excluded
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significant definitions, terms and
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B.46 Although ombudsmen are unsympa
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