Treasury fails to define ‘new contract’ in ECJ Gender Ruling

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Insurers will be disappointed with lack of clarification, law firm says

Her Majesty’s Treasury (HMT) has failed to clarify what constitutes a new contract under the European Court of Justice (ECJ) Gender Ruling, which is due to take effect this December.

UK insurers were hoping that Treasury’s response to the consultation on the ECJ Ruling would clarify what constitutes a new contract.

Under the ruling, new insurance contracts will have to be ‘gender neutral’ - in other words not be priced based on the sex of the policyholder - from 21 December 2012 onwards.

But insurers are unclear on whether certain situations, such as when a contract is renewed automatically, would be defined as a ‘new contract’ under the ECJ Ruling.

The Treasury, however, chose not to clarify what is meant by ‘new contract’. “Only the courts can provide an authoritative interpretation of the [ECJ] judgment and additional guidance from the Government would not help to minimise the risk of legal challenge to insurance providers,” it stated in its response to the consultation.

Law firm Hogan Lovells partner Christian Wells said the publication of the Treasury’s response comes after several months of uncertainty for the UK insurance industry.

“The insurance industry will be disappointed that there is no further clarification in the Government response as to what will constitute a new contract,” he said. “It appears there is little which HMT, or indeed the EU, can do to influence court decisions in the area and the question remains one of the national contract law of each member state. It is likely that this will continue to occupy the industry in the lead up to 21 December 2012.”

He added: “The conclusion in the response states that although further guidance on the ECJ judgment would be desirable, Government does not think ‘this would be helpful or appropriate’ as the issues involved are ‘complex’. As such the insurance industry will probably only get the affirmative guidance they are seeking from the courts - as a result of potential claims and subsequent litigation.”