The Law Commission is considering the abolition of the duty of disclosure, at least for consumers, under major proposals to overhaul current insurance contract law.
Releasing its first ‘issues' paper, on misrepresentation and non-disclosure, on Friday, at a seminar organised by law firm, Beachcroft LLP, the Law Commission has proposed replacing the insured's duty to disclose information with a duty on insurers to ask specific questions.
In relation to misrepresentation, the Law Commission is suggesting that the test for materiality would be based on the “reasonable insured” rather than the “prudent insurer”.
Also, new remedies would broadly follow the Financial Ombudsman Service's approach and would include proportionality.
Speaking at the event, Peter Tyldesley of the Law Commission explained that the current legal position is untenable, because different rules are being applied by the courts, under the FSA rules and by the Financial Ombudsman.
Richard Evans, a partner and head of the Policy Coverage Unit at Beachcroft LLP, welcomed a rebalancing of the law. However, speaking at the event, he said: “I am concerned by the proposed distinction between consumer and business cases. I believe a distinction between insureds that have and have not received professional advice in preparing their proposal forms would better tackle the mischief of the current law.”
A second issues paper on warranties is expected in November 2006 and the first of two consultation papers is anticipated next summer, at which point the Law Commission's proposals for these important areas are likely to be finalised.
A final report and draft Bill is suggested for 2010.
