Ireland: Proposed Reform Of Consumer Insurance Contracts

Last Updated: 29 October 2015
Article by April McClements

Introduction

The Law Reform Commission has published its long-awaited report on consumer insurance contracts, including a draft Consumer Insurance Contracts Bill 2015. The report makes 105 recommendations for reforms to the rules, which date largely from the 18th century. According to the commission, the rules do not reflect the existing realities of the bargaining powers of consumers compared to large insurers.

The reforms apply to any insurance contract (life or non-life) between an insurer and a consumer. They do not apply to:

  • insurance brokers or insurance intermediaries;
  • reinsurance contracts; or
  • marine, air or transport insurance contracts.

Definition of 'consumer'

For the purpose of the reforms, the commission recommends that the definition of 'consumer' be that which applies for the purpose of complaints to the Financial Services Ombudsman and under the Consumer Protection Code 2012 – namely, individuals and small businesses with a turnover of less than €3 million.

Duty of disclosure

One of the most significant reforms is the recommendation that the existing pre-contractual duty of disclosure be replaced with a statutory duty to answer carefully and honestly specific questions posed by an insurer that identify the material risks and relevant information actually relied on by the insurer. The commission takes the view that modern insurers are far better resourced and equipped than consumers to identify facts that will be material in deciding to accept risks or fix premiums.

The pre-contractual duty of disclosure will be confined to responding to questions and the consumer will be under no duty to volunteer additional information. The insurer must ask specific rather than general questions in plain and intelligible language. Any ambiguity shall be interpreted in the consumer's favour.

In its December 2011 consultation paper on insurance contracts, the commission had recommended retaining the pre-contractual duty of disclosure, but that this be restricted to facts or circumstances for which the proposer had actual knowledge. This is a significant change in the commission's position.

Policy avoidance

The commission has recommended that where a consumer's non-disclosure, misrepresentation or other breach of contract is innocent or due to negligence, insurers should not be able to repudiate liability under the insurance contract, but should be required to make proportionate payments to the consumer. Such payments would be proportionately adjusted to take account of the presence or absence of carelessness by the consumer and whether the breach of contract actually affected the specific risk undertaken by the insurer. The commission recommends that the insurer's right to repudiate liability remain in case of fraud.

However, the commission considers that the wide definition of 'fraudulent misrepresentation' (insofar as it includes statements that are made recklessly), derived from Derry v Peak and applied in McAleenan v AIG (Europe) Ltd, does not adequately define the concept of fraud. In the commission's view, 'recklessness' should be limited to circumstances where the maker of the statement consciously disregards whether the statement is true.

Abolition of warranties

The commission has also recommended the abolition of the concept of warranties in insurance contracts and their replacement with statutory rules that will enable insurers to continue to include provisions in contracts that precisely identify or define the risk insured while protecting consumers from the unfair and unjust effects of the law. Such provisions will be treated as suspensive conditions – that is, on breach of the condition, the insurer's liability is suspended for the duration of the breach, but if the breach has been remedied by the time that a loss has occurred, the insurer must (in the absence of any other disclosure) pay any claim made.

Third-party rights

Significantly, the commission has also recommended that third parties which are intended to benefit under an insurance contract be permitted to make a direct claim against the insurer. The commission recommends that third parties:

  • be allowed to bring claims directly against insurers where necessary and appropriate;
  • be able to pay any excess under a policy where this is required to proceed with a case; and
  • be able to obtain relevant documentary and other information directly from insurers where required.

Other reforms

The commission also recommends:

  • the abolition of the requirement to have an insurable interest in the risk insured and to replace it with a requirement that a policyholder prove actual loss;
  • that subrogation not be permitted against persons with a family or close personal relationship to the policyholder;
  • replacement of the post-contractual duty of good faith with specific statutory duties, including a duty on consumers to pay premiums within a reasonable period and a duty on insurers to handle claims and complaints promptly and fairly; and
  • that the draft bill provide that the Marine Insurance Act 1906 does not apply to any insurance contract to which the bill applies.

There are also reforms recommended in respect of both insured's and insurer's duties on renewal, in claims handling and the provision of documents to the insured.

Comment

The definition of 'consumer' adopted in the legislation is expansive and the High Court has previously recognised that difficulties arise from this definition. The definition is likely to present practical difficulties for insurers if adopted. For example, firms or companies with a turnover of less than €3 million will be considered consumers, requiring substantially different policy wordings for commercial insurance (eg, professional indemnity or directors' and officers' liability), than for similar firms or companies with a slightly higher turnover.

The recommendation that an insurer make a proportionate payment where there has been innocent or negligent non-disclosure may also be challenging to apply in practice and could lead to disputes.

Overall, the commission's draft bill envisages significant reforms to insurance law as it applies to consumer contracts. If adopted, insurers will need to substantially redraft their consumer insurance policies. Insurers will also need to give careful consideration to proposal forms and ensure that they include specific and unambiguous questions directed at identifying material risks.

However, it remains to be seen whether the draft bill will be adopted by the legislature. It appears unlikely to be priority legislation for the remaining lifetime of the government. If enacted in its current form, the draft bill envisages a period of 18 months following enactment before the reforms come into force, to enable the insurance sector to put in place the practical arrangements needed to implement the reforms and to allow consumer bodies to communicate their effects to the public. Therefore, it appears that it will be some time before the recommended reforms come into force, if enacted.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions