THE “BASIS OF THE CONTRACT CLAUSE” IN INSURANCE LAW1
| Date | 01 January 1971 |
| Author | R. A. Hasson |
| Published date | 01 January 1971 |
| DOI | http://doi.org/10.1111/j.1468-2230.1971.tb02310.x |
THE
“
BASIS
OF
THE CONTRACT CLAUSE
”
IN
INSURANCE
LAW’
No
meaningful reform of insurance law can be achieved without
a
complete overhaul
of
the law which has developed around the
‘‘
basis of the contract
”
clause in insurance litigation.
It
is
the
purpose
of
the present paper
to
trace briefly the history and the
present state of doctrine in this area and to propose remedial
legislation.
For
many kinds
of
insur-
ance the insured has to
fill
in
a
proposal form which is in effect an
application form.2 This proposal form contains a list
of
questions,
and at the end of the form the insured has to sign
a
declaration,
of
which the following
is
typical:
‘‘
I
declare that the particulars and statements made by me
above are true, and
I
agree that they shall be the basis
of
the
contract between me and the
-
Company.’’
The effect
of
this language is
to
incorporate the insured’s
answers into the insurance policy although they are not set out in
the policy. An incorrect answer
to
any one
of
these questions is
fatal
to
the insured’s claim. This is
so,
whether he answered the
question
in
good faith to the best of his knowledge,
or,
indeed,
whether his response related to
a
material fact
or
not.
The story
of
how the law managed to reach this remarkable state
of
affairs is an extremely interesting one.
It
is at least necessary
to
outline this story before proposing any remedy.
The problem may be simply stated.
THE
EIGHTEENTII-CENTURY BACKGROUND
As
a
necessary preliminary a word must be said about the meaning
of
the word
“
warranty
”
in insurance Whatever transforma-
tions may have occurred with regard
to
the use
of
the word in other
1
I
am miicll iudebted to
Professor
William
P.
Young, Jr.,
of
Colin:~bia
Law
School
for
readinn and criticising an earlier draft
of
this papcr. He is, of
coiirse,
not
respo&ble
for
any of the conclusions
I
have rcachcd iu hhis paper.
2
’*
In
life
and
motor-vehicle insurance this practice may be regarded
as
invari-
able; in fire insurance we understand that
it
is unusua,l;
in
other c!asses the
practice
probably
varies.”
Lam
Reform Committee Fifith Report
(Conditions
atid
Escepfiotis in Insttrance Policies)
Cnind.
62
(1957),
p.
4,
para.
6.
“‘[T]he
general scheme
has
exhibited many variations, some major a.nd sonic
minor in detail.”
Per
Lord
Wright in
Provincial Insurance
Go.
v.
Morgan
rl9331
A.C.
240,
251.
I
have borrowed my
form
from
Borrie and Diamond,
The
Constrtner,
Society
nnd
the
Law
(2nd ed.,
1968),
p.
231.
Pee,
more
fully.
for an
excellent treatment of the subject, Patterson,
”
Warran-
ties in Insurance
Law
”
(1931)
34
Colum.L.Rev. 595. Kote
a!so
the important
article by l’ance, “The History of the Derelopmcnt of the Warranty in
Insurance Law
”
(1911)
20
Pale
L.J.
523.
20
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