Insurance law reform is now long overdue, the new Government has
been warned.
George Mortimer, an associate in the Birmingham office of DLA
Piper, said it would be "disappointing" if the coalition failed to
recognise this.
English and Scottish Law Commissions had since 2006 been
producing recommendations to reform an area substantially unchanged
since the Marine Insurance Act 100 years before, itself a
restatement of centuries-old principles.
"Will the new Government take up the challenge and provide time
for statutory reform of British insurance law?" asked Mr
Mortimer.
There had been calls, he pointed out, since 1980 for a
rebalancing of the law relating to nondisclosure and insurance
warranties.
Of the former, he said: "This is seen as particularly
unfair."
Of the latter, he warned: "The position where an insured makes
statements regarding existing circumstances or future actions and
the terms of the policy operate to give them the status of
'warranties' - in other words, conditions fundamental to the
contract - means the insurer does not have to show that the
warranty has any bearing on the risk, and if it is breached, the
insurer does not have to pay a loss even if completely unconnected
with the breach.
"Many insured consumers and businesses do not appreciate that
'basis of contract' clauses in standard proposal forms mean all
statements in the form are treated as warranties.
"These rules are clearly capable of operating very unfairly if
insurers insist on their full rights. That unfairness means many
insurers now accept that reform is in their industry's interest, as
well as that of the wider public."
Mr Mortimer highlighted how the Law Commissions had sought to
address the two issues in a draft Consumer Insurance Bill last
December, which, if enacted would abolish the consumer's duty to
volunteer material facts and prevent insurers from relying on basis
of contract clauses. No parliamentary time has yet been made
available for that bill.
"Generally this would bring consumer insurance law into line
with current Financial Ombudsman Service practice."
The Law Commissions are also pursuing further suggestions to
reform insurance law relating to consumers and businesses,
including that a legal remedy should be available for an
insured who has suffered further loss because of late payment of
his claim.
"English law is unique in denying an insured any remedy for late
payment," said Mr Mortimer.
"The new Government naturally has many legislative priorities,
but it is to be hoped that despite the absence of any mention in
its first Queen's Speech it will soon give serious attention to
long overdue insurance law reform, in the interest of consumers,
business, and a modern insurance industry."
Draft Bills only become law if the Government makes
Parliamentary time available.