The Revised Statements of Insurance Practice
| DOI | http://doi.org/10.1111/j.1468-2230.1986.tb01715.x |
| Published date | 01 November 1986 |
| Date | 01 November 1986 |
LEGISLATION
THE
REVISED
STATEMENTS
OF
INSURANCE
PRACTICE
Cosmetic Change or Major Surgery?
THE last decade has witnessed mounting concern about certain
aspects of the law of insurance and related practices
of
British
insurers. The continued existence of the positive duty
of
disclosure
of
material facts, the testing
of
materiality by reference to the
effect of non-disclosure “on the judgment of the risk formed by a
hypothetical prudent insurer,”’ and the ability to avoid a contract
for breach of warranty despite the absence of any
nexus
between
the breach and the loss have all been subjected to sustained
criticism.’ Both Law Commissions had proposed that insurance
contracts should fall within the ambit of the controls for exclusion
clauses ultimately prescribed in the Unfair Contract Terms Act
1977
but this suggestion was not implemented. Indeed, insurance
contracts are specifically excluded from coverage by the
However, the possibility of legislative reform was enough to prompt
the several professional bodies representing many companies to
promulgate codes of practice for non-life and life ins~rance.~
Though yet another instance of the industry’s tradition
of
self-
regulation, the Statements received, on the whole, a cool reception,
the leading work on insurance stating: “We do not regard these
statements of self-regulatory practice, as a substitute for reform
of
the law.”5 They have also been described as a mere “token gesture
to consumerism” effecting little change.6 The most potentially
influential indictment of the Statements was voiced by the Law
Commission in its Report on non-disclosure and breach of warranty:
This reformulation of the test considered to be appropriate in English law, is to
be
found in
C.T.I. International Inc. and Reliance Group Inc.
v.
Oceanus Mutual
Underwriting Association (Bermuda) Ltd.
[1984]
1
Lloyd‘s Rep.
476.
In Scotland, marine
and motor contracts apart, the appropriate test is that of the reasonable person in the
position
of
the insured: see
Life Associution
of
Scotland
v.
Foster
(1873)
11
M.
351.
A
recent decision of the South African Appellate Division confirms the distinctive approach
of the Civilian legal tradition: see
Mutual and Federal Insurance Co. Ltd.
v.
Oudtshoorn
Municipality
1985
(1)
S.A.
419,
C.A.
*
Hasson,
(1969) 32
M.L.R.
615; (1971) 34
M.L.R.
29; (1984) 47
M.L.R.
505;
Birds,
[1977]
J.B.L.
231;
Forte
(1978) 23
J.L.S.
274; [1985]
L.M.C.L.Q.
482.
The most
trenchant recent judicial criticism
is
that
of
MacKenna
J.
in
Lumberf
v.
Co-operutive
Insurance Society Lrd.
[1975] 2
Lloyd’s Rep.
485.
And see
Murray
v.
Legal and General
Assurance Society Ltd.
[1970]
2
Q.B.
495;
Kennedy
v.
Smith and Ansvar Insurance Co.
Ltd.,
1976
S.L.T.
110;
Davidson
v.
Guardian Royal Exchange Assurance,
1981
S.L.T.
81.
Unfair Contract Terms Act
1977, ss.1(2), 15(3)(a),
Sched.
1.
Note also
Law
Corn.
No.
69,
Scot. Law Com.
No.
39,
Second Report on Exemption Clauses
(1975),
paras.
246,
250.
Respectively, the Statement of Insurance Practice
of
May
1977
and the Statement of
Long-Term Insurance Practice of July
1977.
See also the
Policyholder Insurance Journal,
May
20,
1977.
Self-regulation is discussed in Lewis,
(1985)
48
M.L.R.
275.
MacGillivray and Parkington,
Insurunce Law
(7th ed.), para.
705.
Birds,
(1977)
40
M.L.R.
677
at
684.
754
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