The British Insurance Law Association (Bila) is embarking on a major review of insurance law which could lead to the first insurance contract act in almost 100 years.
Insurance contract law is mainly based on common law and has not been codified since the 1906 Marine Insurance Act, which has also been held to apply to non-marine contracts. So far there have been numerous sundry acts covering areas as diverse as employers' liability and horse riding establishments.
Bila vice-president Derrick Cole explained the need for change: “Successive reinterpretation of insurance law by the courts over the years has led to an enormous amount of uncertainty.”
He also pointed to the anomaly whereby the law, in the form of the Insurance Ombudsman, protects personal lines policyholders, but there is scant protection for the commercially insured.
He said: “There is no code of insurance practice for the businessman who is largely at the mercy of the larger insurers.”
The Bila working party will review the maze of judge-made and statue law and make recommendations for reform to the Law Commission. Its first meeting is on January 16, 2001.
Brokers, underwriters and reinsurers are represented to ensure the group reaches a consensus view on such major issues as breach of warranty, utmost good faith and non-disclosure of a material fact. The party's chairman is deputy high court judge Adrian Hamilton QC.
Cole said: “The group will be trying to identify areas of insurance contract law which have created problems for the market.”
He gave the example of the law on utmost good faith on which all insurance contracts are based. Cole said this lacked any remedy in damages for parties whose claim is delayed in being paid; their only compensation is the return of any paid premium.