Since the Insurance Act 2015 came into effect, it is meaningful for people in the Insurance Industry to be acquainted with certain key changes and/or some reasons of these changes. Official materials, such as Law Commission report relevant to Insurance Contract Law and oral or written evidences from the Bill Committee on Insurance Bill, are selected to deduce what ought to be the judicial practice. A certain amount of prejudication or case law is also of benefit to our perception of the Insurance Act 2015. These materials indicate that the Insurance Act 2015 balances various interests and is going to be impactful around the world. The article is divided into four main parts: the first is an introduction to the principles of fair presentation and proportionate remedy; the second is an analysis of breach of warranty in the context of the new Act; the third examines remedies for fraudulent claims; and the last part looks at how the Act is supplemented by the Enterprise Act 2016 on the issue of compensation of late payment.
2 Law Commission, ‘Insurance Law Non-Disclosure and Breach of Warranty’ (Law Com No 104, 1980).
3 Law Commission, ‘Insurance Contract Law: Business Disclosure; Warranties, Insurers’ Remedies for Fraudulent Claims; and Late Payment’ (Law Com No 353 2014).
4 Law Commission, ‘Insurance Contract Law: Misrepresentation, Non-Disclosure and Breach of Warranty by the insured’ (Law Com CP No 182 2007).
5 Robert Merkin, Colin Croly, ‘Doubts about insurance codes’ (2001) JBL 587.
6 Law Commission, ‘Insurance Contract Law: Misrepresentation, Non-Disclosure and Breach of Warranty by the insured’.
7 Law Commission, ‘Insurance Contract Law: The Business Insured’s Duty of Disclosure and the Law of Warranties’ (Law Com CP No 204, 2012).
8 Law Commission, ‘Insurance Contract Law: Business Disclosure; Warranties, Insurers’ Remedies for Fraudulent Claims; and Late Payment’.
9 Law Commission, Issues Paper 1, Insurance Contract Law: Misrepresentation and Non-Disclosure (2006) <http://lawcommission.justice.gov.uk/docs/ICL1_Misrepresentation_and_Non-disclosure.pdf> accessed 8 May 2015.
10 Marine Insurance Act 1906, s 17, “A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party.”
11 Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995] 1 AC 501.
12 Susan Hodges, Law of Marine Insurance (Routledge‑Cavendish, 1996).
13 Zurich General Accident and Liability Insurance Co v Leven 1940 SC 406.
14 s 20 Marine Insurance Act 1906.
15 Law Commission, ‘Insurance Law Non‑Disclosure and Breach of Warranty’.
16 Lambert v Cooperative Insurance Society Ltd [1957] 2 Lloyd’s Rep 485.
17 Law Commission, Consumer Insurance Law: pre‑contract disclosure and misrepresentation (Law Com No 319, 2009).
18 ss 3(3) Insurance Act 2015.
19 s 3(1) Insurance Act 2015.
20 [1985] 1 Lloyd’s Rep 437.
21 [1990] 2 Lloyd’s Rep 377.
22 Iron Trades Mutual Insurance Co v Companhia de Seguros Imperio [1992] 1 Re. L. R. 213. Hobhouse J. held the same view.
23 Ionides v Pacific Fire & Mar Ins Co (1891) L. R. 6 Q. B. 674.
24 (1766) 3 Burr 1905, 1 Wm Bl 593.
25 Explanatory Notes to the Insurance Bill 2015.
26 Marine Insurance Act 1906, s 18(2) “[e]very circumstance is material which would influence the judgement of a prudent insurer in fixing the premium, or determining whether he will take the risk.” and s 20(2) “[a] representation is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk.”
27 Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995] 1 AC 501. At page 527, Steyn LJ was quoted as stating that “avoidance for non‑disclosure is the remedy provided by law because the risk presented is different from the true risk.”
28 [1984] 1 Lloyd’s Rep 476.
29 [1995] 1 AC 501.
30 [1995] 2 Lloyd’s Rep 116.
31 Ibid, 117.
32 Drake Insurance plc v Provident Insurance plc [2003] EWCA Civ 1834.
33 Ibid, para 28.
34 Law Commission, ‘Insurance Contract Law: The Business Insured’s Duty of Disclosure and the Law of Warranties’.
35 Law Commission, ‘Insurance Contract Law: Business Disclosure; Warranties, Insurers’ Remedies for Fraudulent Claims; and Late Payment’.
36 s 18(3)(c) Marine Insurance Act 1906, “In the absence of inquiry the following circumstances need not be disclosed, namely: any circumstance as to which information is waived by the insurer.”
37 John Birds, Ben Lynch, Simon Milnes, MacGillivray on Insurance Law (12th edn, Sweet & Maxwell, 2012).
38 [2004] 2 Lloyd’s Rep. 483.
39 Ibid, 487.
40 Ibid, 500.
41 Ibid.
42 Ibid.
43 Mactavish, ‘Corporate risk & insurance: the case for placement reform’ (the Mactavish Protocols, 2011) <http://www.airmic.com/system/files/Corporate%20Risk‑Placement%20Reform%20EXECUTIVE%20SUMMARY.pdf> accessed 28 June 2015.
44 [1984] 1 Lloyd’s Rep. 476, 498.
45 Mar Rich & Co v Portman [1997] 1 Lloyd’s Rep 225. In this case, the insurers take the risk without any questions, although the assured is expected to be asked about the previous loss. The court held that the presentation is unfair due to the silence of material facts of the loss which the assured is bound to know.
46 Seaman v Fonereau (1743) 2 Stra 1183.
47 Law Commission, ‘Consumer Insurance Law: pre‑contract disclosure and misrepresentation’.
48 Law Commission, ‘Insurance Contract Law: Misrepresentation, Non‑Disclosure and Breach of Warranty by the insured’.
49 Law Commission, Issues Paper 1, ‘Insurance Contract Law: Misrepresentation and Non‑Disclosure (2006)’ <http://lawcommission.justice.gov.uk/docs/ICL1_Misrepresentation_and_Non-disclosure.pdf> accessed 8 May 2015.
50 Ibid.
51 The function of a “held covered” clause is to provide the assured by the insurer with one more chance to correct inadvertent breach of utmost good faith. In Hewitt Brothers v Wilson [1915] 2 K.B. 739, a “held covered” clause was included in a marine policy which covered normal marine perils including risk of breakage. The insurer denied the insurance claim on the ground that there has been non‑disclosure of the nature of machinery, due to the fact that one of the damaged machines caused by breakage is second‑hand and was unmarked. Lord Reading C.J. at first explained that second‑hand machines is quite a few parts of all machinery and the same policy has been continued many times and the insurer never asked for the class of machinery as other underwriters do. He finally held that the assured is protected by the “held covered” clause in the policy.
52 Law Commission, ‘Insurance Contract Law: The Business Insured’s Duty of Disclosure and the Law of Warranties’.
53 Oral Evidence taken before the special public bill committee on Insurance Bill (24 December 2014), Q 16, <http://www.publications.parliament.uk/pa/ld201415/ldselect/ldinsur/81/81.pdf> HL Paper 81, accessed 9 May 2015.
54 ss 4(6) and 4(7) Insurance Act 2015.
55 Written Evidence taken before the special public bill committee on Insurance Bill (24 December 2014), ‘Written submissions of the LMA and IUA’, <http://www.publications.parliament.uk/pa/ld201415/ldselect/ldinsur/81/81.pdf> HL Paper 81, accessed 9 May 2015.
56 Ibid.
57 Ibid.
58 s 19 Marine Insurance Act 1906, “Disclosure by agent effecting insurance. Subject to the provisions of the preceding section as to circumstances which need not be disclosed, where an insurance is effected for the assured by an agent, the agent must disclose to the insurer—(a) Every material circumstance which is known to himself, and an agent to insure is deemed to know every circumstance which in the ordinary course of business ought to be known by, or to have been communicated to, him; and (b) Every material circumstance which the assured is bound to disclose, unless it come to his knowledge too late to communicate it to the agent.”
59 (1867) LR 2 QB 511.
60 s 33(1) Marine Insurance Act 1906, “A warranty, in the following sections relating to warranties, means a promissory warranty, that is to say, a warranty by which the assured undertakes that some particular thing shall or shall not be done, or that some condition shall be fulfilled, or whereby he affirms or negatives the existence of a particular state of facts.”
61 Law Commission, Issues Paper 2, Insurance Contract Law: Warranties (2006) <http://lawcommission.justice.gov.uk/docs/ICL2_Warranties.pdf> accessed 8 May 2015.
62 Explanatory Notes to the Insurance Bill 2015.
63 s 34 Marine Insurance Act 1906.
64 Law Commission, ‘Insurance Contract Law: Business Disclosure; Warranties, Insurers’ Remedies for Fraudulent Claims; and Late Payment’.
65 Jonathan Gilman, Robert Merkin, Claire Blanchard, Mark Templeman, Arnould’s Law of Marine Insurance and Average (18th edn, Sweet & Maxwell, 2013), ch 19, §10. See also Overseas Commodities Ltd v Style [1958] 1 Lloyd’s Rep 546. In this case, a good deal of the insured objects (tins) did not conform to the warranty of the date‑marking requirement, so the insurer is discharged from liability of the policies.
66 s 33(3) Marine Insurance Act 1906.
67 John Hare, ‘The Omnipotent Warranty: England v The World’ in Marc Huybrechts and others (eds), Marine Insurance at the Turn of the Millennium (Intersentia, 1999).
68 Law Commission, Issues Paper 2, ‘Insurance Contract Law: Warranties’ (2006) <http://lawcommission.justice.gov.uk/docs/ICL2_Warranties.pdf> accessed 8 May 2015.
69 Genesis Housing Association Ltd v Liberty Syndicate Management Ltd [2013] EWCA Civ 1173.
70 Provincial Insurance Co v Morgan [1933] A.C. 240, 251.
71 R. A. Hasson, ‘the “basis of the Contract Clause” in insurance law’ (1971) 34(1) MLR 29.
72 Baris Soyer, Warranties in Marine Insurance (2nd edn, Cavendish, 2006).
73 Thomson v Weems (1884) 9 App. Cas. 671.
74 Jonathan Gilman, Robert Merkin, Claire Blanchard, Mark Templeman, Arnould’s Law of Marine Insurance and Average (18th edn, Sweet & Maxwell, 2013).
75 (1786) 1 Term Rep 343, 343.
76 Rob Merkin, ‘Reforming Insurance Law: Is there a case for reverse transportation?’ <http://lawcommission.justice.gov.uk/docs/ICL_Merkin_report.pdf> accessed 4 May 2015.
77 Carl Christian Rösiö, ‘Warranties in marine insurance: an unpleasant necessity?’ (Juridisk Publikation, 2010) <http://juridiskpublikation.se/wp-content/uploads/2014/10/12010_Carl-ChristianR%C3%B6si%C3%B6.pdf> accessed 4 May 2015.
78 Hussain v Brown [2001] 2 Lloyd’s Rep 161. The rule of warranty does not require a promise to continue into the future. A warranty that the premises were secured by an alarm should by no means be considered as a promise that an alarm would always be available in the future.
79 Printpak v AGF [1999] Lloyd’s Rep IR 542.
80 Houghton v Trafalgar Insurance Co Ltd [1954] 1 QB 247.
81 Michael Parkington, Nicholas Legh Jones, MacGillivray & Parkington on Insurance Law (8th edn, Sweet & Maxwell 1988).
82 [2000] Lloyd’s Rep IR 47; see also Baris Soyer, Warranties in Marine Insurance (2nd edn, Cavendish, 2006).
83 [2000] Lloyd’s Rep IR 47, 48.
84 Ibid, 49, 50.
85 Parliament, ‘Annex A: Support for reform’ <http://www.parliament.uk/documents/impact-assessments/IA14-19B.pdf> accessed 6 May 2015.
86 Airmic, ‘Conditions precedent in insurance Policies’ (Airmic technical 2014) <http://www.airmic.com/system/files/conditions%20precedent_WEB.pdf> accessed 4 May 2015.
87 Howard Bennett, ‘Reflections on values: The Law Commissions’ proposals with respect to breach of promissory warranty and pre‑formation non‑disclosure and misrepresentation in commercial insurance’ in Baris Soyer (ed), Reforming Marine and Commercial Insurance Law (Informa, 2008).
88 Martin Maritime Ltd v Provident Capital Indemnity Fund Ltd [1998] 2 Lloyd’s Rep 652, 652.
89 Kler Knitwear Ltd v Lombard General Insurance Company Ltd [2000] Lloyd’s Rep IR 47; also see Baris Soyer, Warranties in Marine Insurance (2nd edn, Cavendish, 2006).
90 Stanley B. Long, Seattle, Washington, ‘“Held Covered” Clauses in Marine Insurance Policies’ (1957) 24 Ins. Counsel J. 401.
91 Baris Soyer, Warranties in Marine Insurance (2nd edn, Cavendish, 2006).
92 Pt Buana Samudra Pratama v Marine Mutual Insurance Association (NZ) Ltd [2011] 2 Lloyd’s Rep 655.
93 [1977] 2 Lloyd’s Rep 560, 568.
94 The Star Sea [1997] 1 Lloyd’s Rep 360; and The Mercandian Continent [2001] 2 Lloyd’s Rep 563.
95 ss 10(6) Insurance Act 2015.
96 ss 10(2) Insurance Act 2015.
97 ss 10(4) Insurance Act 2015.
98 Explanatory Notes to the Insurance Bill 2015, para 90.
99 Law Commission, ‘Insurance Contract Law: Business Disclosure; Warranties, Insurer’s Remedies for Fraudulent Claims; and Late Payment’.
100 Ozlem Gurese, ‘Reform of construction of insurance contract terms’ (2013) 1 JBL 39.
101 Law Commission, Issues Paper 2, ‘Insurance Contract Law: Warranties’ (2006) <http://lawcommission.justice.gov.uk/docs/ICL2_Warranties.pdf> accessed 8 May 2015.
102 s 43 Marine Insurance Act 1906: “[w]here the place of departure is specified by the policy, and the ship instead of sailing from that place sails from any other place, the risk does not attach.”
103 Oral Evidence taken before the special public bill committee on Insurance Bill (24 December 2014), Q 25, <http://www.publications.parliament.uk/pa/ld201415/ldselect/ldinsur/81/81.pdf> HL Paper 81, accessed 9 May 2015.
104 Howard Bennett, ‘Reflections on values: The Law Commissions’ proposals with respect to breach of promissory warranty and pre‑formation non‑disclosure and misrepresentation in commercial insurance’ in Baris Soyer (ed), Reforming Marine and Commercial Insurance Law (Informa, 2008).
105 Timothy Edmonds, Insurance Bill, House of Commons Library Research Paper 15/03, 20 January 2015.
106 Written Evidence taken before the special public bill committee on Insurance Bill (24 December 2014), ‘Written submissions of the LMA and IUA’, <http://www.publications.parliament.uk/pa/ld201415/ldselect/ldinsur/81/81.pdf> HL Paper 81, accessed 9 May 2015.
107 Oral Evidence taken before the special public bill committee on Insurance Bill (24 December 2014), <http://www.publications.parliament.uk/pa/ld201415/ldselect/ldinsur/81/81.pdf> HL Paper 81, accessed 9 May 2015.
108 Malcolm A. Clarke, Law of Insurance Contracts (5th edn, Informa, 2006).
109 Law Commission, Issues Paper 7, ‘Insurance Contract Law: The insured’s Post‑Contract Duty of Good Faith’ <http://www.lawcom.gov.uk/wp-content/uploads/2015/06/ICL7_Insureds_Duty_of_Good_Faith.pdf> accessed 9 May 2015, p vii. Also see The Star Sea [2001] UKHL 1 [2003] 1 AC 469.
110 [1994] CLC 373. It’s worth noting that this case is no longer good law under The Star Sea [2003] 1 AC 469.
111 K/S Merc‑Scandia v Certain Lloyd’s Underwriters [2001] 2 Lloyd’s Rep 563.
112 Agapitos v Agnew [2003] QB 556.
113 s 17 Marine Insurance Act 1906: “A contract of marine insurance is a contract based upon the utmost good faith…”.
114 Explanatory Notes to the Insurance Bill 2015, para 101.
115 s 12 Insurance Act 2015.
116 [2003] 1 AC 469.
117 [1999] Lloyd’s Rep IR 209.
118 [1997] SCLR 12.
119 s 12(1)(c) Insurance Act 2015.
120 Oral Evidence taken before the special public bill committee on Insurance Bill (24 December 2014), Q 27, <http://www.publications.parliament.uk/pa/ld201415/ldselect/ldinsur/81/81.pdf> HL Paper 81, accessed 9 May 2015.
121 [2002] Lloyd’s Rep IR 364.
122 C 259 and 260 Explanatory Notes to the Enterprise Act.
123 ss 44(3) of the Enterprise Act. The Enterprise Bill 2015 received Royal Assent on 4 May 2016; the provisions relevant to late payment came into force on 4 May 2017.
124 Apostolos Konstantine Ventouris v Trevor Rex Mountain (the Italia Express (No 3)) [1992] 2 Lloyd’s Rep 281.
125 Peter Macdonald Eggers, Simon Picken, Patrick Foss, Good Faith and Insurance Contracts (Informa, 2010). Although the authors consider that further damages are unavailable under the current law.
126 John Birds, Birds’ Modern Insurance Law (Sweet & Maxwell, 2013); J.R. Birds, ‘Case Comment: No damages remedy when insurers unjustifiably repudiate liability’ (1997) JBL 368; Peter MacDonald Eggers, ‘late payment of insurance claims’ (2013) LMCLQ 341; Mahfuz, ‘A Research to Develop English Insurance Law to Accommodate Islamic Principles’ (DPhil thesis, University of Manchester 2013) <https://www.escholar.manchester.ac.uk/api/datastream?publicationPid=uk-ac-man-scw:206987&datastreamId=FULL-TEXT.PDF> accessed 8 May 2015; Colin Ying, ‘Damages for late payment of insurance claim’ (2006) LQR 205; Malcolm Clarke, ‘compensation for failure to pay money due: a ‘blot on English common law jurisprudence’ partly removed’ (2008) JBL 291; Janan Al‑Asady, ‘Damages, late payment and indemnity insurance’ (2006) JBL 396; Sir Andrew Longmore, ‘An insurance contracts act for a new century’ (2001) LMCLQ 356.
127 [1999] 1 Lloyd’s Rep IR 111.
128 Ibid.
129 [2005] EWCA Civ 840.
130 Ibid.
131 Reports on Council Meetings, HC Deb 2 February 2016 c879, <http://www.publications.parliament.uk/pa/ld201516/ldhansrd/text/151102‑gc0002.htm> accessed 19 Oct 2016.
132 Explanatory Notes of the Enterprise Act 2016.
133 Ibid, para 269.
134 Christopher Hill Ltd v Ashington Piggeries Ltd [1969] 3 All E.R. 1496, 1524; Brown v K.M.R. Services Ltd [1995] 4 All E.R. 598, 621; Kpohraror v Woolwich Building Society [1996] 4 All E.R. 119, 126; Hadley v Baxendale (1854) 9 Exch 341.
135 (1954) 9 Exch 341.
136 The Achilleas [2008] 2 Lloyd’s Rep 275.
137 [2013] EWCA Civ 37.
138 Ibid, para 17.
139 Ibid, para 29.
1 LLM, University of Exeter School of Law; Associate, EY Chen & Co Law Firm.
(2017). The Resounding Success of the Insurance Act 2015 with a Slight Blemish. Legal issues Journal, 5 (1), https://www.legalissuesjournal.com/article/05-01-11012017/
