Law Commission argues review will ensure law is fit for purpose in face of EU threats

Insurance contract law could be overhauled across Europe in the next three years to create a more common legal framework, according to the Law Commission.

Hugh Beale, Law Commissioner for England and Wales, said a review by the European Commission (EC) was "onthe horizon" and could begin as early as 2009.

He told Insurance Times: "It is thought that senior leaders of the EU may pick up on [the work being carried out by the EC's 'action plan' group]."

Beale said the UK's current review of insurance contract law, which could bring about reform of the national system, would place it in a better position for the European-wide evaluation.

"Nobody would say that the UK's insurance contract law is up-to-date," said Beale. "But if we look at it now then we will also be ready to meet the European challenge. But that is not an immediate threat."

The EC has been looking at the entire body of European law, known as the acquis communautaire - the body of EU legislation which candidate countries must adopt to become EU members - since January 2003.

It produced The action plan on a more coherent European contract law with the intention of developing a common frame of reference.

The 'fundamental principles, definitions and model rules' in the frame of reference will be used by the EC as a tool in drafting new legislation and improving the existing law.

The frame of reference might also form the basis of a general European contract law, which is likely to be an optional contract code.

Beale added that the UK review of areas such as misrepresentation, non-disclosure and breach of warranty (see box), could also lead to a completely new insurance Act to replace the Marine Insurance Act 1906 on which insurance law is based.

Law Commission to open discussions on reform
The Law Commission is to make available an informal issues paper on misrepresentation and non-disclosure in September, in the next stage of its review of insurance contract law.

Three meetings, including a public seminar in early October, will be held to discuss the issues.

A second issues paper on breach of warranty will be produced in November, followed by a third on post-contractual good faith next year before a full consultation paper is issued in the summer. A final report on the case for reform is not expected until late 2008 or early 2009.