A
BILL
TO
Make new provision about insurance contracts; to amend the Third Parties
(Rights against Insurers) Act 2010 in relation to the insured persons to whom
that Act applies; and for connected purposes.
Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and
consent of the Lords Spiritual and Temporal, and Commons, in this present
Parliament assembled, and by the authority of the same, as follows:—
In this Act (apart from Part 6)—
5“consumer insurance contract” has the same meaning as in the Consumer
Insurance (Disclosure and Representations) Act 2012;
“non-consumer insurance contract” means a contract of insurance that is
not a consumer insurance contract;
“insured” means the party to a contract of insurance who is the insured
10under the contract, or would be if the contract were entered into;
“insurer” means the party to a contract of insurance who is the insurer
under the contract, or would be if the contract were entered into;
“the duty of fair presentation” means the duty imposed by section 3(1).
(1) This Part applies to non-consumer insurance contracts only.
(2)
This Part applies in relation to variations of non-consumer insurance contracts
as it applies to contracts, but—
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(a)
references to the risk are to be read as references to changes in the risk
relevant to the proposed variation, and
(b) references to the contract of insurance are to the variation.
(1)
5Before a contract of insurance is entered into, the insured must make to the
insurer a fair presentation of the risk.
(2)
The duty imposed by subsection (1) is referred to in this Act as “the duty of fair
presentation”.
(3) A fair presentation of the risk is one—
(a) 10which makes the disclosure required by subsection (4),
(b)
which makes that disclosure in a manner which would be reasonably
clear and accessible to a prudent insurer, and
(c)
in which every material representation as to a matter of fact is
substantially correct, and every material representation as to a matter
15of expectation or belief is made in good faith.
(4) The disclosure required is as follows, except as provided in subsection (5)—
(a)
disclosure of every material circumstance which the insured knows or
ought to know, or
(b)
failing that, disclosure which gives the insurer sufficient information to
20put a prudent insurer on notice that it needs to make further enquiries
for the purpose of revealing those material circumstances.
(5)
In the absence of enquiry, subsection (4) does not require the insured to
disclose a circumstance if—
(a) it diminishes the risk,
(b) 25the insurer knows it,
(c) the insurer ought to know it,
(d) the insurer is presumed to know it, or
(e) it is something as to which the insurer waives information.
(6)
Sections 4 to 6 make further provision about the knowledge of the insured and
30of the insurer, and section 7 contains supplementary provision.
(1)
Subsections (2) to (5) provide for what an insured knows or ought to know for
the purposes of section 3(4)(a).
(2) An insured who is an individual knows—
(a) 35what is known to the individual, and
(b)
what is known to one or more of the individuals who are responsible
for the insured’s insurance.
(3)
An insured who is not an individual knows only what is known to one or more
of the individuals who are—
(a) 40part of the insured’s senior management, or
(b) responsible for the insured’s insurance.
(4)
Whether an individual or not, an insured ought to know what should
reasonably have been revealed by a reasonable search of information available
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to the insured (whether within its own organisation or held by others, for
example its agent, and whether the search is conducted by making enquiries or
by any other means).
(5)
In this section, references to an individual’s knowledge do not include
5confidential information acquired by the insured’s agent (or an employee of
the insured’s agent) through a business relationship with someone other than
the insured.
(6) In this section—
(a)
an individual is responsible for the insured’s insurance if the individual
10participates on behalf of the insured in the process of procuring the
insured’s insurance (whether the individual does so as the insured’s
employee or agent, or as an employee of the insured’s agent, or in any
other capacity),
(b)
“senior management” means those individuals who play significant
15roles in the making of decisions about how the insured’s activities are
to be managed or organised.
(1)
For the purposes of section 3(5)(b), an insurer knows something only if it is
known to one or more of the individuals who participate on behalf of the
20insurer in the decision whether to take the risk, and if so on what terms
(whether the individual does so as the insurer’s employee or agent, or as an
employee of the insurer’s agent, or in any other capacity).
(2)
For the purposes of section 3(5)(c), an insurer ought to know something only
if—
(a)
25an employee or agent of the insurer knows it, and ought reasonably to
have passed on the relevant information to an individual mentioned in
subsection (1), or
(b)
the relevant information is held by the insurer and is readily available
to an individual mentioned in subsection (1).
(3) 30For the purposes of section 3(5)(d), an insurer is presumed to know—
(a) things which are common knowledge, and
(b)
things which an insurer offering insurance of the class in question to
insureds in the field of activity in question would reasonably be
expected to know in the ordinary course of business.
(1)
For the purposes of sections 3 to 5, references to an individual’s knowledge
include not only actual knowledge, but also matters which the individual
suspected, and of which the individual would have had knowledge but for
deliberately refraining from confirming them or enquiring about them.
(2)
40Nothing in this Part affects the operation of any rule of law according to which
knowledge of a fraud perpetrated by an individual (“F”) either on the insured
or on the insurer is not to be attributed to the insured or to the insurer
(respectively), where—
(a)
if the fraud is on the insured, F is any of the individuals mentioned in
45section 4(2)(b) or (3), or
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(b)
if the fraud is on the insurer, F is any of the individuals mentioned in
section 5(1).
(1)
A fair presentation need not be contained in only one document or oral
5presentation.
(2)
The term “circumstance” includes any communication made to, or information
received by, the insured.
(3)
A circumstance or representation is material if it would influence the judgment
of a prudent insurer in determining whether to take the risk and, if so, on what
10terms.
(4) Examples of things which may be material circumstances are—
(a) special or unusual facts relating to the risk,
(b)
any particular concerns which led the insured to seek insurance cover
for the risk,
(c)
15anything which those concerned with the class of insurance and field of
activity in question would generally understand as being something
that should be dealt with in a fair presentation of risks of the type in
question.
(5)
A material representation is substantially correct if a prudent insurer would
20not consider the difference between what is represented and what is actually
correct to be material.
(6)
A representation may be withdrawn or corrected before the contract of
insurance is entered into.
(1)
25The insurer has a remedy against the insured for a breach of the duty of fair
presentation only if the insurer shows that, but for the breach, the insurer—
(a) would not have entered into the contract of insurance at all, or
(b) would have done so only on different terms.
(2) The remedies are set out in Schedule 1.
(3)
30A breach for which the insurer has a remedy against the insured is referred to
in this Act as a “qualifying breach”.
(4) A qualifying breach is either—
(a) deliberate or reckless, or
(b) neither deliberate nor reckless.
(5) 35A qualifying breach is deliberate or reckless if the insured —
(a) knew that it was in breach of the duty of fair presentation, or
(b) did not care whether or not it was in breach of that duty.
(6) It is for the insurer to show that a qualifying breach was deliberate or reckless.
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(1)
This section applies to representations made by the insured in connection
5with—
(a) a proposed non-consumer insurance contract, or
(b) a proposed variation to a non-consumer insurance contract.
(2)
Such a representation is not capable of being converted into a warranty by
means of any provision of the non-consumer insurance contract (or of the
10terms of the variation), or of any other contract (and whether by declaring the
representation to form the basis of the contract or otherwise).
(1)
Any rule of law that breach of a warranty (express or implied) in a contract of
insurance results in the discharge of the insurer’s liability under the contract is
15abolished.
(2)
An insurer has no liability under a contract of insurance in respect of any loss
occurring, or attributable to something happening, after a warranty (express or
implied) in the contract has been breached but before the breach has been
remedied.
(3) 20But subsection (2) does not apply if—
(a)
because of a change of circumstances, the warranty ceases to be
applicable to the circumstances of the contract,
(b)
compliance with the warranty is rendered unlawful by any subsequent
law, or
(c) 25the insurer waives the breach of warranty.
(4)
Subsection (2) does not affect the liability of the insurer in respect of losses
occurring, or attributable to something happening—
(a) before the breach of warranty, or
(b) if the breach can be remedied, after it has been remedied.
(5)
30For the purposes of this section, a breach of warranty is to be taken as
remedied—
(a)
in a case falling within subsection (6), if the risk to which the warranty
relates later becomes essentially the same as that originally
contemplated by the parties,
(b) 35in any other case, if the insured ceases to be in breach of the warranty.
(6) A case falls within this subsection if—
(a)
the warranty in question requires that by an ascertainable time
something is to be done (or not done), or a condition is to be fulfilled,
or something is (or is not) to be the case, and
(b) 40that requirement is not complied with.
(7) In the Marine Insurance Act 1906—
(a)
in section 33 (nature of warranty), in subsection (3), the second sentence
is omitted,
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(b) section 34 (when breach of warranty excused) is omitted.
(1) 5If the insured makes a fraudulent claim under a contract of insurance—
(a) the insurer is not liable to pay the claim,
(b)
the insurer may recover from the insured any sums paid by the insurer
to the insured in respect of the claim, and
(c)
in addition, the insurer may by notice to the insured treat the contract
10as having been terminated with effect from the time of the fraudulent
act.
(2) If the insurer does treat the contract as having been terminated—
(a)
it may refuse all liability to the insured under the contract in respect of
a relevant event occurring after the time of the fraudulent act, and
(b) 15it need not return any of the premiums paid under the contract.
(3)
Treating a contract as having been terminated under this section does not affect
the rights and obligations of the parties to the contract with respect to a
relevant event occurring before the time of the fraudulent act.
(4)
In subsections (2)(a) and (3), “relevant event” refers to whatever gives rise to
20the insurer’s liability under the contract (and includes, for example, the
occurrence of a loss, the making of a claim, or the notification of a potential
claim, depending on how the contract is written).
(1) This section applies where—
(a)
25a contract of insurance is entered into by a person (“A”) in order to
provide cover for one or more other persons (“C”),
(b) none of the Cs is a party to the contract,
(c)
so far as the cover for each C is concerned, the contract would have
been a consumer insurance contract if entered into by that C rather than
30by A, and
(d)
a fraudulent claim is made under the contract by or on behalf of one of
the Cs (“CF”).
(2)
Section 11 applies in relation to the claim as if the cover provided for CF were
provided under an individual consumer insurance contract between the
35insurer and CF as the insured; and, accordingly—
(a)
the insurer’s rights under section 11 are exercisable only in relation to
the cover provided for CF, and
(b)
the exercise of any of those rights does not affect the cover provided
under the contract for anyone else.
(3)
40In its application by virtue of subsection (2), section 11 is subject to the
following particular modifications—
(a)
the reference to “the insured” in subsection (1)(b) of that section, in
respect of any particular sum paid by the insurer, is to whichever of A
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and CF the insurer paid the sum to; but if a sum was paid to A and
passed on by A to CF, the reference is to CF,
(b) the reference to “the insured” in subsection (1)(c) is to both CF and A,
(c)
the reference in subsection (2)(b) to the premiums paid under the
5contract is to premiums paid in respect of the cover for CF.
(1)
10Any rule of law permitting a party to a contract of insurance to avoid the
contract on the ground that the utmost good faith has not been observed by the
other party is abolished.
(2)
Any rule of law to the effect that a contract of insurance is a contract based on
the utmost good faith is modified to the extent required by the provisions of
15this Act and the Consumer Insurance (Disclosure and Representations) Act
2012.
(3) Accordingly—
(a)
in section 17 of the Marine Insurance Act 1906 (marine insurance
contracts are contracts of the utmost good faith), the words from “, and”
20to the end are omitted, and
(b)
the application of that section (as so amended) is subject to the
provisions of this Act and the Consumer Insurance (Disclosure and
Representations) Act 2012.
(4)
In section 2 of the Consumer Insurance (Disclosure and Representations) Act
252012 (disclosure and representations before contract or variation), subsection
(5) is omitted.
(1)
A term of a consumer insurance contract, or of any other contract, which would
30put the consumer in a worse position as respects any of the matters provided
for in Part 3 or 4 of this Act than the consumer would be in by virtue of the
provisions of those Parts (so far as relating to consumer insurance contracts) is
to that extent of no effect.
(2) In subsection (1)—
(a) 35references to a contract include a variation,
(b)
references to the consumer include any person referred to as “C” in
section 12.
(3)
This section does not apply in relation to a contract for the settlement of a claim
arising under a consumer insurance contract.
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(1)
A term of a non-consumer insurance contract, or of any other contract, which
would put the insured in a worse position as respects representations to which
section 9 applies than the insured would be in by virtue of that section is to that
5extent of no effect.
(2)
A term of a non-consumer insurance contract, or of any other contract, which
would put the insured in a worse position as respects any of the other matters
provided for in Part 2, 3 or 4 of this Act than the insured would be in by virtue
of the provisions of those Parts (so far as relating to non-consumer insurance
10contracts) is to that extent of no effect, unless the requirements of section 16
have been satisfied in relation to the term.
(3)
A term of a non-consumer insurance contract, or of any other contract, which
would put any person referred to in section 12 as “C” in a worse position as
respects the matters dealt with in that section than C would be in by virtue of
15section 12 is to that extent of no effect.
(4) In this section, references to a contract include a variation.
(5)
This section does not apply in relation to a contract for the settlement of a claim
arising under a non-consumer insurance contract.
(1)
20In this section, “the disadvantageous term” means such a term as is mentioned
in section 15(2).
(2)
The insurer must take sufficient steps to draw the disadvantageous term to the
insured’s attention before the contract is entered into or the variation agreed.
(3) The disadvantageous term must be clear and unambiguous as to its effect.
(4)
25In determining whether the requirements of subsections (2) and (3) have been
met, the characteristics of insured persons of the kind in question, and the
circumstances of the transaction, are to be taken into account.
(5)
The insured may not rely on any failure on the part of the insurer to meet the
requirements of subsection (2) if the insured (or its agent) had actual
30knowledge of the disadvantageous term when the contract was entered into or
the variation agreed.
35For section 19 of the Third Parties (Rights against Insurers) Act 2010 (power to
amend sections 4 to 6 of the Act) substitute—
(1)
The Secretary of State may by regulations make provision adding or
removing circumstances in which a person is a “relevant person” for
40the purposes of this Act, subject to subsection (2).
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(2)
Regulations under this section may add circumstances only if, in the
Secretary of State’s opinion, the additional circumstances—
(a)
involve actual or anticipated dissolution of a body corporate or
an unincorporated body,
(b)
5involve actual or anticipated insolvency or other financial
difficulties for an individual, a body corporate or an
unincorporated body, or
(c)
are similar to circumstances for the time being described in
sections 4 to 7.
(3) 10Regulations under this section may make provision about—
(a)
the persons to whom, and the extent to which, rights are
transferred under section 1 in the circumstances added or
removed by the regulations (the “affected circumstances”),
(b)
the re-transfer of rights transferred under section 1 where the
15affected circumstances change, and
(c)
the effect of a transfer of rights under section 1 on the liability of
the insured in the affected circumstances.
(4)
Regulations under this section which add or remove circumstances
involving actual or anticipated dissolution of a body corporate or
20unincorporated body may change the cases in which the following
provisions apply so that they include or exclude cases involving that
type of dissolution or any other type of dissolution of a body—
(a)
section 9(3) (cases in which transferred rights are not subject to
a condition requiring the insured to provide information or
25assistance to the insurer), and
(b) paragraph 3 of Schedule 1 (notices requiring disclosure).
(5)
Regulations under this section which add circumstances may provide
that section 1 of this Act applies in cases involving those circumstances
in which either or both of the following occurred in relation to a person
30before the day on which the regulations come into force—
(a) the circumstances arose in relation to the person;
(b)
a liability against which the person was insured under an
insurance contract was incurred.
(6) Regulations under this section which—
(a) 35add circumstances, and
(b)
provide that section 1 of this Act applies in a case involving
those circumstances in which both of the events mentioned in
subsection (5)(a) and (b) occurred in relation to a person before
the day on which the regulations come into force,
40must provide that, in such a case, the person is to be treated for the
purposes of this Act as not having become a relevant person until that
day or a later day specified in the regulations.
(7)
Regulations under this section which remove circumstances may
provide that section 1 of this Act does not apply in cases involving
45those circumstances in which one of the events mentioned in subsection
(5)(a) and (b) (but not both) occurred in relation to a person before the
day on which the regulations come into force.
(8) Regulations under this section may—