Insurance Contract Law
This is a joint project with the Scottish law Commission. We began work in January 2006 when the teams at the two Commissions issued a scoping paper, inviting views on which areas of insurance contract law were in need of reform. In the light of the responses received, the teams published a second paper setting out their decisions on the scope of the project.
The size of the project led the Commissioners to design a phased programme of work, separating pre-contract consumer and business issues.
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Elements of the project
This diagram illustrates the elements of the project, and their current status.
Insurance Contract Law: Business Disclosure; Warranties; Insurers’ Remedies for Fraudulent Claims; and Late Payment, July 2014
Recommended new legislation covering: what businesses and other non-consumer policyholders should disclose to their insurer before taking out insurance; warranties; insurers’ remedies for fraudulent claims; and remedies for policyholders were an insurer has unreasonably refused a valid claim or paid a claim late. These recommendations were implemented in the Insurance Act 2015, as amended by the Enterprise Act 2016.
Consumer Insurance Law: Pre-contract Disclosure and Misrepresentation, December 2009
Recommended new legislation relating to the issue of what a consumer should tell their insurer before taking out insurance. These recommendations were implemented in the Consumer Insurance (Disclosure and Representations) Act 2012.
Insurance Contract Law: The Business Insured’s Duty of Disclosure and the Law of Warranties, June 2012
Covers the issues relating to a business policyholder’s duty to give pre-contract information to an insurer as set out in sections 18 to 20 of the Marine Insurance Act and considers the law of warranties for businesses and consumers.
Insurance Contract Law: Post Contract Duties and other Issues, December 2011
Covers the issues relating to damages for late payment, Insurers’ remedies for fraudulent claims, insurable interest and policies and premiums in marine insurance and sets out proposals for reforming the law in these areas.
Misrepresentation, Non-disclosure and Breach of Warranty by the Insured, July 2007
Covered both consumer and business insurance, and set out proposals for reforming the law on both pre-contractual information and warranties.
Throughout the project we have produced a series of issues papers.
- Misrepresentation and Non-disclosure, September 2006: Asked whether a new statute should replace the current patchwork with a single system.
- Warranties, November 2006: Asked whether, for consumer insurance, and possibly for business insurance, the only remedies that should be available when the insured has made a false statement of fact should be those for misrepresentation.
- Intermediaries and Pre-contract Information, March 2007: Considered the position where a mistake or fraud by the agent leads to information not being disclosed or being misrepresented, or where it leaves the insured in breach of a warranty of existing or past facts.
- Insurable Interest, January 2008: Asked whether the law on insurable interest should be repealed.
- Micro-businesses – should micro-businesses be treated like consumers for the purposes of pre-contractual information and unfair terms?, April 2009: Asked about protection against unfair terms in insurance contracts for micro-businesses, and how micro-business should be defined. Proposed micro-businesses be treated as consumers for the purposes of pre-contractual information.
- Damages for Late Payment, March 2010: Asked whether an insurer should be liable for a policyholder’s loss suffered as a result of a late payment or non-payment of an insurance claim.
- The Insured’s Post-contract Duty of Good Faith, July 2010: Asked whether the law should provide greater clarity on the remedies available to insurers when policyholders act fraudulently after the insurance contract has been formed.
- The Broker’s Liability for Premiums (Section 53), July 2010: Asked whether there should be reform to bring the broker’s liability into line with the general law on contract and agency.
- The Requirements for a Formal Marine Policy (Section 22), October 2010: Asked whether section 22 and several related sections should be repealed, and whether references in the 1906 Act to “policies” should be re-interpreted as reference to insurance contracts.
- Insurable Interest, 27 March 2015: Updated proposals for reform of the requirement for insurable interest.
Other project papers
- Section 83 of the Fires Prevention (Metropolis) Act 1774, March 2009: Asked whether s83, which deals with cases where buildings are damaged by fire, should be repealed.
- Policy statement: The Status of Intermediaries – for whom does an intermediary act in transmitting pre-contract information from consumer to insurer?, March 2009: Proposed a new statutory code for deciding for whom the intermediary acts when it passes pre-contractual information from the consumer to the insurer. These provisions were incorporated into the draft Bill on consumer insurance.
Lessons from Australia
In 1984 the Australians introduced a new Insurance Contracts Act that reformed many of the issues we are considering, including non-disclosure and warranties. The Australian Treasury reviewed those reforms and prepared amendments to their legislation. We were therefore particularly interested to see what the Australians have done, and what effects it has had.
Professor Rob Merkin undertook a legal and practical analysis of the 1984 Act and wrote a paper highlighting the successes and failures of the Australian legislation. It is not intended as Law Commission policy.
Area of law
Commercial and common law