The long awaited Consumer Insurance Contracts Act was signed into law on 26 December 2019. The Act has yet to be enacted, but that is expected to happen in the first six months of 2020.
The Act makes significant changes to the Irish Insurance landscape - including in respect of D&O policies - insofar as it relates to consumers. “Consumers” are defined in the legislation as natural persons and sole traders/partnerships/corporate entities* with an annual turnover of €3m or less.
The Act abolishes the duty of utmost good faith and requires consumers only to answer specific questions posed to them by Insurers honestly, and with reasonable care. It will be assumed that questions posed are material to the risk to be insured. A consumer is under no duty to volunteer any further/updated information at renewal, only to answer any additional questions posed by Insurers. Further, if a consumer fails to provide an answer to a question, or provides an obviously incomplete answer and the Insurer fails to follow up on this, the Insurer will be deemed to have waived their rights in relation to this question (i.e. the subject matter of same will be deemed immaterial).
The Act abolishes basis clauses and warranties are converted into suspensory conditions. The Act also provides for proportionate remedies for breach. For example, there is no entitlement to avoid a policy in cases of innocent misrepresentation. In cases of negligent misrepresentation, the remedy available to the Insurer will be what the Insurer would have done had it been aware of the full facts (e.g. payment of a higher premium, avoidance with a return of the premium). In cases of fraudulent misrepresentation, Insurers are still entitled to avoid the contract. The Act also does not allow Insurers to refuse indemnity for late notification by a consumer if there is no prejudice to the Insurers position.
Another significant change is the fact that the Act provides third parties rights with respect of consumer Insurance policies. Under the Act, a third party can step into the shoes of an Insured party (vis a vis their Insurer) in circumstances where the Insured party has died, or the court otherwise directs that it is just an equitable to do so.
Insurers operating out of the London market will be used to these provisions, which largely mirror the Insurance Act 2015, which came into force in the UK in 2016. The significant difference between the UK position will be the fact that in Ireland, the law has not changed for “non-consumers” (i.e. sole traders/partnerships/corporate entities with an annual turnover of over €3m). Further, the Irish Act will not apply to policies of reinsurance.
As noted above, we expect the Act to come into force within the next 6 months, however given the recentgeneral election, that estimate may be subject to change.