What general rules, requirements and procedures govern the conclusion of (re)insurance contracts in your jurisdiction?
The standard principles of Irish contract law and common law apply to insurance contracts. However, insurance contracts are also subject to additional specific common law and statutory principles and rules, including – most importantly in relation to the conclusion of (re)insurance contracts – the principle of utmost good faith (which places a duty of disclosure on the insured at inception and/or renewal of the contract).
The main characteristics of an insurance contract are set out in case law in Ireland and include the requirement that the insured must have an insurable interest in the subject matter of the contract and that insurers will indemnify the insured in the event of a loss. The risk must also be clearly described.
A number of the principles and rules concerning insurance contracts, including the concept of insurable interest, were examined by the Law Reform Commission (LRC) in its Consultation Paper on Insurance Contracts. The recommendations proposed by the LRC are largely incorporated into the Consumer Insurance Contracts Bill 2017 (draft legislation proposed by the Irish government) to amend a number of aspects of insurance contracts.
Are (re)insurance contracts subject to any mandatory/prohibited provisions?
There are a number of requirements in motor insurance policies, in marine insurance and in life assurance policies as a result of particular statutory requirements and obligations arise where the insured is a consumer (ie, under the Consumer Protection Code 2012 and the Consumer Protection Act 2007). The Sale of Goods and Supply of Services Act 1980 also applies.
The European Communities (Consumer Credit Act and Unfair Contract Terms in Consumer Contracts) Regulations 1995, the European Communities (Distance Marketing of Consumer Financial Services) Regulation 2004 and the Consumer Credit Act 1995 also apply, as well as there being pre-contractual provision of information requirements.
Most proposal forms include a declaration to be signed by the insured that all information provided is accurate and complete, and acknowledging that the information will form the basis of the contract (basis-of-contract clause). However, basis-of-contract clauses are strictly construed by the Irish courts and the Irish government has proposed draft legislation in the form of the Consumer Insurance Contracts Bill 2017 which provides, among other things, for the abolition of these clauses.
Can any terms be implied into (re)insurance contracts (eg, a duty of good faith)?
Parties to a contract of insurance have a duty of good faith, which, among other things, places a duty of disclosure on the insured at inception and/or renewal of the contract.. An insured must disclose all facts material to an insurer’s appraisal of the risk. Every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether it will take the risk. Breach of this duty and/or a misrepresentation by the insured (a representation of fact made that is untrue, which can be fraudulent, reckless or innocent) entitles the insurer to avoid the contract.
The government has proposed draft legislation in the form of the Consumer Insurance Contracts Bill 2017. One of the reforms in the bill relates to the duty of disclosure and introduces proportionate remedies for misrepresentation but retains the remedy of avoidance for fraudulent misrepresentation.
What standard or common contractual terms are in use?
While the terms of an insurance contract will vary depending on the type of policy, there are a number of standard or common terms. These terms define the scope of cover being provided by the contract (insuring clause), matters that are expressly excluded from cover (exclusions to cover), requirements or conditions which must be adhered to by an insured (conditions or conditions precedent) and statements of fact or intent by an insured in relation to the risk insured, which must be strictly complied with (warranties).
Most proposal forms also include a declaration to be signed by the insured that all information provided in the proposal form is accurate and complete and acknowledging that the information will form the basis of the contract (basis-of-contract clauses).
Warranties and basis-of-contract clauses are strictly construed by the Irish courts as breach discharges insurers from liability from the date of breach and the breach does not have to be material to the loss. The government has proposed draft legislation in the form of the Consumer Insurance Contracts Bill 2017 which provides, among other things, for the replacement of warranties with suspensive conditions and the abolition of basis-of-contract clauses.
What is the state of development in your jurisdiction with regard to the use of ‘smart’ contracts (ie, blockchain based) for (re)insurance purposes? Are any other types of financial technology commonly used in the conclusion of (re)insurance contracts?
Technology such as smart contracts, blockchain and end-to-end (sales, service, renewal, claims) digital capability are all being explored by insurers in the Irish market. Technology such as telematics, mobile payments and social media complaints handling are already in use in the Irish market.
At a European level European Insurance and Occupational Pensions Authority is developing an InsurTech Task Force which will be responsible for the assessment of cyber risk. The Central Bank of Ireland has increased its focus in this area and has issued cross industry guidance on IT and cybersecurity risks. During 2017, the Central Bank also started to focus on how companies approach IT management.
What rules and procedures govern breach of contract (for both (re)insurer and insured)?
The effect of a breach of contract depends on the type of breach, but can result in an insurance contract being deemed void or voidable.
If the insured breaches a warranty (no matter how insignificant that breach may appear), the insurer will be entitled to repudiate. A breach of a basis-of-contract clause will allow the insurer to treat the contract as void from inception.
Insurers may also avoid a contract if there has been a material non-disclosure and/or misrepresentation by the insured at inception and/or renewal of the contract or if an insured makes a fraudulent claim.
The effect of a breach of a condition by an insured in a contract depends on whether that condition is a bare condition or a condition precedent to liability. If the breach relates to a bare condition, the remedy is damages. If the breach relates to a condition precedent to liability, the insurer will be entitled to decline the claim without any requirement to show prejudice.
Where the insurer has breached the contract, the general actions for breach of contract are available to the insured (subject to the terms of the contract). Where an insurer has failed to pay a valid claim, an insured would have an action for damages. If damages are inappropriate, the court may grant specific performance (this is a discretionary remedy).
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