1. The Insurance Act 2015 and Marine Insurance
Professor James Davey
University of Southampton

2. The Insurance Contract Law Reform Project
Law Commission driven, 2006-
Consumer Insurance (Disclosure & Representations) Act 2012
Insurance Act 2015
Not intended to remedy issues in the marine insurance market.
Government did not want multi-tier regulation: only consumer / commercial divide
MAT risks assumed would ‘contract out’ of inappropriate reforms.

3. The Insurance Act 2015 Some significant changes, some ‘tidying up’
Applies to all insurance contracts under English law made after 12th August 2016, unless parties ‘contract out’.
Reinsurance over ‘mixed old & new’
Open cover cargo insurance as a contract of insurance or a contract for insurance?
[Matters if ‘open cover’ agreed in July (old law) but insured shipments are in September (new law)]

4. Does Everything Have to Change?
Does not (mostly) prevent use of prior contracts.
Does change the duties owed and the remedies for non-compliance.
‘Old’ law has been repealed in many cases. Cannot simply choose MIA 1906 instead.
Know whether you are contracting on basis of new law or ‘contracting out’ to something more traditional.

5. Key Area 1: ‘Contracting Out’
Unlike MIA 1906: there is a special procedure for ‘contracting out’
Cannot simply show a contrary intention (this was often good enough for MIA 1906)
“Section 16(2) states that any term ‘which would put the insured in a worse position as respects [the substantive areas covered under the Act] than the insured would be in by virtue of the provisions of those Parts (so far as relating to non-consumer insurance contracts) is to that extent of no effect’, unless the conditions laid down in s. 17 are met” (p.3)

6. S. 17 IA 2015
Two requirements…
(1) that the term be ‘clear and unambiguous’ as to its effect; and
(2) that ‘the insurer… take sufficient steps to draw the disadvantageous term to the insured’s attention before the contract is entered into’.
Notice: and the marine market (s. 17(5)).
But: still need to meet the ‘clear and unambiguous’ test.

7. Current Practice Still emerging… The International Group of P&I Clubs:
Contract out of almost all changes under the 2015 Act, except the extension of the ‘duty of disclosure’ under the new regime.
Shows importance of knowing both prior regime and the new regime
[Still a ‘mixed bag’]

8. Key Area 2: ‘The Duty of Fair Presentation of the Risk’
Replaces the duty of pre-contractual disclosure & the rules on misrepresentation (ss MIA 1906)
Merged duty of ‘fair presentation of the risk’
The distinct duty on the broker to make disclosure is removed (the old s. 19)
Some similarities:
Objective test for materiality (prudent underwriter) with additional need for inducement (subjective effect on actual underwriter)

9. Changes:
Explicitly recognises compliance by putting underwriter on notice by sufficient partial disclosure
Regulates form of presentation: ‘no data dumping’
‘reasonably accessible to a prudent underwriter’… (s.3(3)(b) IA 2015)

10. Knowledge: Insured
Mostly mirrors approach of 1906 Act (actual / constructive knowledge)
BUT: extends whose knowledge counts; and what is constructive knowledge
Who> ‘Senior management and those responsible for arranging insurance’
How wide> ‘revealed by a reasonable search’
Problematic: Not just internal system. Databases; subscription or otherwise.

11. Knowledge: Underwriter
No need to disclose knowledge held by the underwriter
No equivalent duty to carry out a ‘reasonable search’
Constructive knowledge limited to reasonable expectation of an underwriter of that class of business. [so Hull war risks not identical to marine risks for cargo]

12. Remedies No longer avoidance ab initio for all breaches
Avoidance for ‘fraud’
Otherwise: What would the underwriter have done IF it had had proper disclosure
Rejected proposal -> Avoidance
Changed terms -> Enforce policy as it would have been agreed
Changed premium -> reduce claim proportionately

13. Key Issue 3: Breach of Warranty etc
S. 10 removes ‘automatic discharge’ rule
Replaces with ‘no liability between moment of breach and curing breach’
Burden of proof? Uncertain.

14. S. 11 IA 2015
S. 11- restricts underwriters’ ability to rely on breach of risk-management clauses
Not applicable to clauses that ‘define the risk as a whole’
Function: losses of a kind/location/time
Underwriter cannot rely on non-compliance IF insured can prove that non-compliance could not have increased the kind of loss that occurred.
A lightning rod for litigation…

15. Key Issue(s) 4: Misc
Fraudulent claims: remedies; NOT limits of fraud (and DC Merwestone)
Utmost Good Faith: No longer gives rise to right to avoid the contract
Late Payment of Claims: Consequential loss as additional remedy; likely to be more symbolic than real, but still important. [Not in force until Easter 2017]