On 12 September 2008, Helen Clark attended the British Insurance Law Association (BILA) Annual Conference. The opening session was lead by the Law Commissioner, Mr David Hertzell, who is heading up the Law Commission's wide scale review of Insurance Contract Law Reform. Mr Hertzell reported that the first stage of the Consultation covering misrepresentation/non-disclosure, breach of warranty and the role of intermediaries had been very well supported by the market and a summary of the business insurance responses was to be published next month. He noted that the responses revealed divergent views on key issues such as the appropriate remedies for misrepresentation and non-disclosure and how materiality was to be defined. The Law Commission therefore believed it was necessary to revisit the issues by way of a further Issues Paper on misrepresentation and non-disclosure in business insurance so as to try to get a better consensus from the market.
Mr Hertzell reported there was broad support for the idea of a default regime, providing freedom of contract for larger business whilst allowing greater protection to small businesses. However further thinking was required as to the specific basis upon which parties should be able to contract out of the scheme and whether a "bright-line" could be imposed based on the size of the business.
With respect to intermediaries, Mr Hertzell confirmed that the Consultation responses were mixed over the central issue of who should bear the loss for a failure by the broker to pass on information on placing. The Commission had originally proposed a "bright-line" test of fair analysis of the market to decide whose agent the broker was, but that part of the Consultation paper addressing misrepresentation and non-disclosure caused by an intermediary was now to be revisited to take on board the Consultation responses. One possibility would be a test based on a combination of decisive and persuasive factors and further feedback would be sought in this regard in due course.
With respect to the project as a whole, the Commission would be proceeding with a final report and draft bill for consumer law reform based on the first Consultation Paper issued in July 2007. A second Consultation Paper would be issued in 2009 covering insurable interest (in respect of which Issue Paper 4 has been published) and claims (post contractual good faith and damages for late payment), in respect of which an Issues Paper would be published later this year or in the first half of 2009. The project was due to conclude in 2010/2011.
A further blog entry will report on the detail of the responses to proposed business insurance law reform once they are published later this year. In the meantime, for a summary of the responses to the proposals for consumer insurance, please see the Blog entry of 2 June 2008.