Insurance Contract Law Issues Paper 2 Warranties - Law Commission

Other types of clause dealing with existing facts
7.56 That leaves a question about policies that seek to achieve the same result by
employing a narrow definition of the risk to be covered or an exception to the risk,
for example by excluding from cover houses that are not built of brick and slate.
The same issue arises in relation to warranties as to the future and is discussed
below.
WARRANTIES AS TO THE FUTURE: A WRITTEN STATEMENT
7.57 In 1980, the Law Commission recommended that insurers should not be entitled
to rely on a breach of warranty unless the insured was supplied with a written
statement of the warranty either at or before the contract was made, or as soon
as possible thereafter. This recommendation is particularly relevant to promissory
warranties, whereby the insured “undertakes that some particular thing shall or
shall not be done”. 13 However it would have applied also to the specific
warranties as to past or existing fact that the Law Commission then thought
should be permitted.
7.58 The law already requires that in marine policies express warranties must be in
writing. 14 We think that this requirement should extend to all forms of insurance.
Where cover is conditional on an insured carrying out a specific task, or refraining
from an activity that would be normal in the circumstances, it is important that
there should be clarity on both sides about what is required. We think the
insured’s obligations should be set out in writing and included or referred to in the
main contract document. For these purposes, writing would include printed and
electronic forms. 15
7.59 We tentatively propose that a claim should only be refused because the
insured has failed to comply with a contractual obligation, if the obligation
is set out in writing and included or referred to in the main contract
document.
7.60 For consumer insurance, it should not be enough for the warranty to be buried
somewhere in the small print of an insurance policy. The insurer should take
specific steps to bring the obligation to the insured’s attention. This is already
regarded as good practice: ICOB Rule 5 requires that significant or unusual terms
are brought to a consumer’s attention. And, as we discussed in Appendix B, the
FOS already makes enforcement of the term dependent on this requirement. We
found several cases where the FOS refused to uphold an unusual term if it was
not brought to the customer’s attention.
13 See Marine Insurance Act 1906, s 33(1).
14 MIA 1906, s 35(2) states that “an express warranty must be included in, or written upon,
the policy, or must be contained in some document incorporated by reference into the
policy”.
15 The Law Commission discussed the definition of writing at length in its 2001 Advice to
Government, Electronic Commerce: Formal Requirements in Commercial Transactions. It
argued that the definition of writing in Schedule 1 of the Interpretation Act 1978 would
include any “words in visible form”, including those held electronically.
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