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Insurance law

Commissioner
Professor Hector MacQueen

Team members
Gillian Swanson, Project Manager
Julie Davidson, Legal Assistant

We are assisting the Law Commission for England and Wales with this project which they are carrying out under their Tenth Programme of Law Reform.

Latest news

Joint Consultation Paper: The Business Insured’s Duty of Disclosure and the Law of Warranties

The third and final Consultation Paper in the Commissions’ joint review of insurance contract law was published in June 2012. It covers the following issues:

The business insured’s duty of disclosure

Under current law, a business policyholder has a duty to disclose every material circumstance it knows about the risk it wants to insure. Failure to do so entitles the insurer to avoid the contract, which means the insurer may treat it as if it did not exist and refuse all claims.

The duty is unclear and sometimes poorly understood, while the consequence of breach is too harsh. There is evidence that the duty does not work well in practice. Our proposals aim to clarify how policyholders are expected to comply with the duty when presenting a risk to insurers and to encourage insurers to assist them in that task. We also propose fairer remedies for breach where the policyholder has not been dishonest.

The law of warranties

An insurance warranty is an important term which, unless exactly complied with by the policyholder, results in the automatic discharge of the insurer’s liability for loss. It makes no difference if the breach is trivial, not material to the risk or if the policyholder remedies the breach prior to loss being incurred.

We propose that breach of a warranty should suspend the insurer’s liability for the duration of the breach; remedy of the breach restores liability. Where a term is designed to reduce a particular type of risk, we propose that liability is suspended only in relation to that risk. This would be mandatory for consumer insurance but subject to freedom of contract for business insurance.

A Summary of the Consultation Paper, a News Release, an Impact Assessment and a Memorandum on relevant New York law prepared for the Law Commissions by David W Kenna are also available. The consultation period has now closed.  We are most grateful to all who responded and are now analysing their comments.

Next steps

In spring 2014, a final report will be published which will cover the topics dealt with in this paper as well as some of the topics covered in the previous (second) joint Consultation Paper.

Consumer Insurance

The Consumer Insurance (Disclosure and Representations) Act 2012 came into force on 6 April 2013.  It derives from the recommendations in our joint Report on Consumer Insurance Law: Pre-Contract Disclosure and Misrepresentation (Scot Law Com No 219) further details of which can be found on the completed project page. The Scottish Government gave their initial response to the Report in March 2010 and gave a further response following the successful passage of the Bill through the UK Parliament.

Summary table of papers published so far:

January 2006 News Release on the Scoping Paper and the Scoping Paper
August 2006 Analysis of Responses and Decisions on Scope
September 2006 Issues Paper 1 - Misrepresentation and Non-Disclosure
November 2006 Issues Paper 2 - Warranties
March 2007 Issues Paper 3 - Intermediaries and Pre-Contract Information
July 2007 Joint Consultation Paper on Insurance Contract Law: Misrepresentation, Non-Disclosure and Breach of Warranty by the Insured (SLC DP134; LC CP 182); Key Proposals with Examples; News Release and Summary of the paper
January 2008 Issues Paper 4 - Insurable Interest and Summary of the paper
May 2008 Summary of responses on consumer insurance contract law
October 2008 Summary of responses on business insurance contract law
March 2009 Insurance intermediaries and pre-contractual information: a policy statement
April 2009 Issues Paper 5 - Micro-businesses
November 2009 Summary of responses to Issues Paper 5: Micro-businesses
December 2009 Joint Report on Consumer Insurance Law: Pre-Contract Disclosure and Misrepresentation
March 2010 Issues Paper 6 - Damages for Late Payment and the Insurer’s Duty of Good Faith
July 2010 Issues Paper 7 - The Insured's Post-Contract Duty of Good Faith
July 2010 Issues Paper 8 - The Broker's Liability for Premiums: Should Section 53 be Reformed?
October 2010 Issues Paper 9 - The Requirement for a Formal Marine Policy:  Should Section 22 Be Repealed?
November 2010 Summary of responses to Issues Paper 6: Damages for Late Payment and the Insurer’s Duty of Good Faith
December 2010 Summary of responses to Issues Paper 7:  The Insured’s Post-Contractual Duty of Good Faith
April 2011 Summary of responses to Issues Paper 8: The Broker's Liability for Premiums: Should Section 53 be Reformed?
April 2011 Summary of responses to Issues Paper 9: The Requirement for a Formal Marine Policy: Should Section 22 be Repealed?
December 2011 Joint Consultation Paper on Post Contract Duties and other Issues (SLC DP152; LC CP201); summary, impact assessment and news release; separate news release on late payment of claims.
June 2012 Joint Consultation Paper on the Business Insured’s Duty of Disclosure
and the Law of Warranties
(SLC DP155; LC CP204 ); Summary; News
Release
; Impact Assessment; Memorandum prepared for the Law
Commissions by David W Kenna.
December 2012 Summary of responses to Joint Consultation Paper on Post Contract Duties and other Issues - Damages for Late Payment
December 2012 Summary of responses to Joint Consultation Paper on Post Contract Duties and other Issues - Insurers Remedies for Fraudulent Claims
February 2013 Summary of responses to Joint Consultation Paper on Post Contract Duties and other Issues - Insurable Interest
February 2013 Summary of responses to Joint Consultation Paper on Post Contract Duties and other Issues - Policies and Premiums in Marine Insurance
March 2013  Summary of responses to Joint Consultation Paper on The Business Insured's Duty of Disclosure and the Law of Warranties - Disclosure
March 2013  Summary of responses to Joint Consultation Paper on The Business Insured's Duty of Disclosure and the Law of Warranties - Warranties

 

Contact

If you require any further information on the Insurance Contract Law project, or if there are matters you wish to raise, please email: gillian.swanson@scotlawcom.gsi.gov.uk.

If you would like to be kept informed of future publications and events we should be happy to add you to our email mailing list on request.