The Law of Insurance Warranties: Flawed Reform and a New Perspective

Description

The book provides a detailed review of efforts to reform the law on insurance warranties in Australia, New Zealand and the UK, arguing that none of these have been successful. The text proposes a radical new approach to reform of this area of the law, demonstrating through detailed stress testing of these proposals that they would deliver more consistent and equitable outcomes than those achieved to date. Reform of the historically inequitable law of insurance warranties in commercial insurance has been introduced in Australia, New Zealand and, most recently, the UK. This book demonstrates that all these reforms have flaws and that none of them can be relied upon to deliver consistently equitable and predictable outcomes; in particular the UK’s, as yet largely untested, Insurance Act 2015 is shown to have serious flaws that have not previously been identified. Building on lessons from these three jurisdictions, the book sets out an alternative approach for dealing with breaches of insurance warranties and demonstrates that this would consistently deliver better outcomes than any of the existing attempts at reforming this area of the law. Providing an unprecedented multi-jurisdictional review of the law on insurance warranties and in particular the treatment of warranties in the Insurance Act 2015, as well as outlining an innovative and radical alternative approach to reform, the book will be of considerable interest and value to practitioners, academics and students, as well as to other common law jurisdictions contemplating reform of this area of the law. Cover Half Title Series Title Copyright Dedication Contents Detailed Contents Acknowledgements Foreword Table of cases Table of legislation Chapter 1 Introduction Chapter 2 The origin and history of warranties Early marine insurance The origin of insurance warranties Implied warranty of seaworthiness Early instances of illegality Causation Role of Lord Mansfield Marine Insurance Act 1906 Chapter 3 The law relating to warranties prior to the Insurance Act 2015 Definition of a warranty The legal effect of a breach of warranty: The Good Luck case Waiver of breach Non-statutory attempts to address the shortcomings in the warranty regime Chapter 4 Implied warranties and the case for a separate regime for marine insurance Implied warranties Implied warranty of seaworthiness Time policies The burden of proof Contemporary relevance of the implied warranty of seaworthiness Other warranty-like provisions relating to marine insurance The implied warranty of legality Commercial practice in the London marine insurance market: is a separate regime for marine insurance justified? Chapter 5 The Law Commission's previous reports and recommendations on warranties The Commission’s 1980 report Law Commission Insurance contract law issues paper 2 warranties, November 2006 Law Commission Consultation Paper No. 182 Insurance Contract Law: misrepresentation, non-disclosure and breach of warranty by the insured, November 2007 Criticism of the reasonable expectations approach Law Commission Consultation Paper No. 204 Insurance Contract Law: the business insured’s duty of disclosure and the law of warranties, a joint consultation paper, June 2012 The Commission’s 2014 report and the Insurance Act 2015 Chapter 6 The law on insurance warranties in Australia Non-marine insurance: s54 of the Insurance Contracts Act 1984 Background S54 Insurance Contracts Act Substance over form The key elements of s54 (A) Questions of scope: when does s54 apply? (B) The requisite effect (C) The treatment of omissions (D) Does s54(1) or s54(2) apply and what amounts to prejudice? The cutting edge: recent cases that illustrate that s54 continues to generate controversy (i) Maxwell v Highway Hauliers (ii) Pantaenius Australia Pty Ltd v Watkins Syndicate 0457 at Lloyd’s (iii) Allianz Australia Insurance Ltd v Inglis (iv) DIF III – Global Co-Investment Fund LP v Babcock & Brown International Pty Limited Review of s54 of the ICA by Cameron and Milne, commissioned by and submitted to the Australian Government, October 2003 The problem defined Impact of s54 on the market Review recommendations Marine insurance and ALRC Insurance Contracts Act or Marine Insurance Act? NSW Insurance Act 1902 The definition of scope The NSW Insurance Act: an assessment of relevance The verdict: an analysis of the effectiveness of s54 as a mechanism for dealing effectively with breaches of warranties and other conditions Chapter 7 The law on insurance warranties in New Zealand Legislative reform of warranties and other provisions Section 5 Mis-statements in other contracts of insurance Section 6 Incorrectness and materiality defined Section 9 of the Insurance Law Reform Act The common law before s11 of the Insurance Law Reform Act Section 11 of the Insurance Law Reform Act Issues of scope Conditions precedent Does s11 apply to warranties? Overseas assessment of s11 An analysis of the New Zealand approach Chapter 8 2014 Law Commission proposals The Commission’s recommendations Time specific warranties Relationship between clauses 10 and 11 Causal linkage or particular risk More warranties? Chapter 9 The Insurance Act 2015: An effective reform of the law on warranties and other provisions? Insurance Act 2015: key provisions Section 9 Warranties and representations Section 10 Breach of warranty Treatment of conditions precedent Section 11 Terms not relevant to the actual loss Changes to draft provisions Does s11 apply to warranties? S11 as a constraint on s10 Non-risk clauses The risk as a whole Exclusion clauses Does s11 apply to conditions precedent? Causal linkage? Potential problems with s11 No account of prejudice Right of termination Treatment of implied warranties under the Insurance Act 2015 Section 10 Section 11 What impact do sections 10 and 11 have on the implied warranty of legality? Contracting out provisions of the Insurance Act 2015 Contracting out: the verdict The Insurance Act 2015: a conclusion Chapter 10 Stress testing the regimes for insurance warranties in Australia, New Zealand and the UK Stress testing the Australian regime with the facts of historic cases from other jurisdictions Stress testing the Australian approach: conclusions Stress testing section 11 of the NZ Insurance Law Reform Act: applying s11 to the facts of key overseas cases Stress testing the New Zealand approach: conclusions Stress testing the Insurance Act 2015 Issues arising as a result of stress testing the Insurance Act 2015 Chapter 11 Issues: Problems with the law on warranties and potential solutions for resolving them In defence of the law on warranties Intervention by the courts: is reform necessary? Warranties: the key problems BILA’s objectives for reform Are voluntary codes the answer? The issues (i) Basis clauses (ii) Should reform apply only to warranties? (iii) Pre-contractual representations (iv) Conditions precedent (v) Issues of scope (vi) Causal linkage (vii) Defining the limits of causation Sole cause or dominant cause Flexibility in approach (viii) Reasonable expectations: an alternate to causal linkage? Reasonable expectations and scope (ix) Should parties have the ability to contract out from any revisions to the law on insurance warranties? (x) Should there be a right of termination? Should termination be immediate once the insurer has notified the insured, or be subject to notice? (xi) Suspension: risk specific or policy wide? (xii) Termination and rectification of breach (xiii) Liability following a breach (xiv) Should any reform apply to marine insurance? (xv) Should implied warranties be preserved? (xvi) Implied voyage conditions Chapter 12 A proposed solution Metrics Proposed solution (i) Prior to contract coming into effect (ii) After the contract has come into effect Implied warranties: is a separate regime necessary for marine insurance? Premium payments Comparison with s54 ICA and s11 NZ Insurance Law Reform Act Contracting out Further stress testing the proposed solution Summary Chapter 13 Conclusion Appendix 1 S54 Insurance Contracts Act 1984 (Australia) Insurer may not refuse to pay claims in certain circumstances Appendix 2 Sections 5, 6, 9 and 11 Insurance Law Reform Act 1977 (New Zealand) Section 5 Mis-statements in other contracts of insurance Section 6 Incorrectness and materiality defined Section 9 Time limits on claims under contracts of insurance Section 11 Certain exclusions forbidden Appendix 3 Insurance Act 2015 Sections 9, 10, 11, 16 and 17 Section 9 Warranties and representations Section 10 Breach of warranty Section 11 Terms not relevant to the actual loss Section 16 Contracting out: non-consumer insurance contracts Section 17 The transparency requirements Appendix 4 Clauses 9, 10 and 11 of draft legislation on warranties and other terms as set out in Law Commission Report Law Com No 353, July 2014 Warranties and representations Breach of warranty Terms relevant to particular descriptions of loss Appendix 5 Marine Insurance Act 1906 Sections 33 and 35 (as amended by the Insurance Act 2015) Section 33 Nature of warranty Section 35 Express warranties Appendix 6 Marine Insurance Act 1906: implied warranties and similar provisions S39 Warranty of seaworthiness of ship S40 No implied warranty that goods are seaworthy S41 Warranty of legality S42 Implied condition as to commencement of risk S43 Alteration of port of departure S44 Sailing for different destination S45 Change of voyage S46 Deviation S48 Delay in voyage Bibliography Books and articles New Zealand, English and Australian Law Commission Reports Statutes (English and International) Other sources List of websites Index