The Insurance Bill 2014
In 2006, the Law Commissions of England and Wales and of Scotland commenced their review of insurance contract law. Following almost eight years of consultation, the draft Insurance Bill was presented to Parliament in the summer of this year [i] and was introduced into the House of Lords on 17 July under the special procedure for uncontroversial bills. The Bill had its second reading before the House of Lords on 30 July 2014.
On 20 November, a Special Public Bill Committee was convened to scrutinise the Bill in the House of Lords. The process will take place over the next few weeks, with the Committee taking written and oral evidence before debating the Bill and any proposed amendments. It is intended that Royal Assent will be given before 30 March, with the law will coming into force by November/December 2016.
Under the proposed new legislation, the existing law on pre-contractual disclosure, as set out in sections 18-20 of the Marine Insurance Act 1906, is replaced with a duty to make a “fair presentation” of the risk. Making a “fair presentation” entails disclosure of every material circumstance which the insured knows or ought to know; or failing that of sufficient information to put a prudent insurer on notice to make further enquiries. In theory, this new test should make it easier for an insured to assess what is required of it in terms of supplying pre-contractual information to insurers.
The Bill defines more clearly whose knowledge is relevant, rather than relying on the common law of attribution. There remains some concern that the provisions relating to attribution of knowledge could cause unnecessary problems in practice and this has been highlighted in the BILA responses to the Bill. The introduction of proportionate remedies in the event of breach, rather than a one-size-fits-all avoidance remedy is generally welcomed as being more flexible and suited to modern commercial realities.
The Bill also deals with insurers’ remedies for fraudulent claims and with warranties, in the latter case abolishing basis of contract clauses and allowing for breaches to be remedied before loss. The Law Commissions proposals on damages for late payment of claims have not been included in the Bill.
On a slightly separate note, the Bill also includes amendment of the Third Parties (Rights against Insurers) Act 2010, which will enable this statute to be brought into force.
[i] Consumer law reform was addressed in the earlier Consumer Insurance (Disclosure and Representations) Act 2012; we do not deal with consumer law in this article.
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.