Repudiation of Insurance Contracts: New Reform of UK Law
The UK Insurance Act of 2015 will come into effect in August 2016. It has updated the law relating to Insurance and has sought to strike more balance between Insurance Companies and Policy Holders. Hopefully the Irish legislature will sit up and take notice.
In Ireland there is a duty of disclosure to disclose facts which are material to the risk, to the insurer which policy holders seek indemnity in respect of. This is the more strict interpretation of the duty of disclosure. The Irish Law Reform Commission recommended retaining this duty of disclosure.
duty of disclosure to disclose facts which are material to the risk
However, the UK Insurance Act has now introduced a duty on a policy holder to make a fair presentation of the risk. Such disclosure requires every material circumstance which the insured knows or ought to know or, failing that, disclosure which gives the insurer sufficient information to put a prudent insurer on notice that it needs to make further enquiries for the purpose of revealing those material circumstances.
The UK Act goes on to say that in the absence of enquiry from the insurer the duty of disclosure does not require an insured to disclose circumstances that the insurer knows or ought to know of, or that the insurer is presumed to know. This represents a huge shift towards the consumer in treating policy holders fairly.
Additionally, the UK Act provides that the remedy for an insurance company for a breach of the new duty to make a fair presentation will be proportionate to the breach and will not allow the insurer to indiscriminately avoid the policy. This will in effect make insurers pay out on a pro rata basis, proportionate to the understatement of the risk.
Irish Courts have been moving towards a more liberal interpretation of the duty of disclosure. However, now that the UK has taken such a great leap towards Consumer Protection, hopefully the Irish legislature will sit up and take notice.
Copyright © Robert Browne, McKeever Solicitors, 12 November 2015.
This article is a general review of the law on the subject of repudiation of contracts and is not intended to be a complete statement of the law. Specific legal advice must be sought on a case by case basis. For further information please contact Robert Browne.