In 2012, a law was passed that abolished the use of basic clauses in consumer insurance contracts. The Law Commission is currently considering similar restrictions on commercial insurance contracts. AIRMIC, the LMA and several leading insurers supported the proposed reforms. Reforms are inevitable. It is not yet clear what the reforms will look like, although a final report with bills is expected from the Law Commission later this year. In New Zealand, the Insurance Law Reform Act 1977 prevents insurers from relying on statements in proposal forms or other documents “on the basis of which the contract was entered into” to avoid liability, unless the statement is both “materially false” and material. Since the basic clauses apply to pre-contractual statements, the breach of warranty occurs from the outset. The requirement of strict compliance means that even a minor, irrelevant or non-causal breach can result in the insurer`s discharge of liability. Policyholders can find themselves without coverage even if they don`t know they`ve done something wrong. There is a widely held view that the basic clauses tip the balance too much in favour of the insurer. If the policy contains a basic clause, any misrepresentation of any kind allows unionized banks to refuse compensation for breach of coverage. The basic clauses apply to statements made in the presentation of risks. They convert the representations of the statements into warranties.
The use of basic clauses is already restricted in other jurisdictions. In Australia, the Insurance Contract Act 1984 (Cth) (which expressly seeks to strike an appropriate balance between the insurer and the insured) contains provisions that render the basic clauses invalid. Section 24 of the Act states that all statements of existing facts must be treated as insurance and not as guarantees. In the normal case, misrepresentations do not affect coverage unless they are important for the risk and affect the judgment of the subscriber involved. Please fill out this form, we will try to respond as soon as possible. If you are already a subscriber, please enter your details below to log in. The rest of this document is only available to i-law.com online subscribers. The Committee on Legal Affairs has proposed further reforms to the proposal process. Please copy this integration script and paste it where you want to embed it. .
gepubliceerd op 13 april 2022