Insurance Contract Law: The Business Insured's Duty of Disclosure and the Law of Warranties
Consultation Paper No 204, Discussion Paper No 155
- Law Commission
- TSO (The Stationery Office)
The joint discussion paper 'Insurance Contract Law: The Business Insured's Duty of Disclosure and the Law of Warranties' outlines proposals which 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.
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.
Fairer remedies are also proposed for a breach where the policyholder has not been dishonest. 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. The Commissions propose that breach of a warranty should suspend the insurer's liability for the duration of the breach; remedy of the breach should then restore liability.
Where a term is designed to reduce a particular type of risk, liability should only be suspended in relation to that risk. This would be mandatory for consumer insurance, but subject to contract for business insurance.
|Format||Paperback||Published||26 Jun 2012|
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