Lloyd's Maritime and Commercial Law Quarterly
Aggravation of risk during the insurance period
Malcolm Clarke *
The English lawyer now looks across the Channel not only perhaps when planning holidays but also to spot any legal clouds on the horizon. Nowadays the prevailing legal winds are not from the West but from the South East. One possibility is rules of law on aggravation of risk during the insurance period for non-marine insurance. This paper looks first at the received position in England and some other countries of common law, next at what is brewing in Brussels and the current state of legislation in Europe, and lastly at what kind of prescription we may have to swallow.
I. INTRODUCTION
Rumours are abroad, abroad in Europe, that there should be rules of law on aggravation of risk during the insurance period for non-marine insurance.1
If there is to be new law at all, its contents, it is submitted, should be evaluated with certain factors in mind. (A) The main reason for insurance from the insured’s point of view is certainty: certainty of cost2
and, above all, certainty of cover3
and associated peace of mind.4
(B) Society at large seeks to promote effective compensation and loss spreading, a factor that overlaps Factor A, in order to foster human activity—but potentially useful human activity: society also wishes to discourage wanton or wasteful conduct in human affairs.5
(C) The insurer, as well as society at large, has an interest in risk management and loss prevention. Factor C overlaps Factor B in its concern to discourage wanton or wasteful conduct. Thus it suggests rules that encourage or at least allow some degree of intervention or control by the insurer over the conduct of the policyholder during as well as immediately before a period of insurance cover. (D) Insurance is for the foolish as well as the wise. Too much
* Professor of Commercial Contract Law, University of Cambridge.
1. A similar study for marine insurance is in preparation by an International Working Group of the Comité Maritime International.
2. A matter of more concern to commerce—so much so that, recently, one insurer has been offering businesses a fixed premium for three years, because research confirmed that stable insurance planning was a selling point.
3. In the case of compulsory motor insurance, for example, this is evident not only in England (Road Traffic Act 1998, ss 148(1) and 151(1)) but also, for example, in France (c. d’ass. R211–13–3) and other countries: certain defences cannot be raised against third parties to whom the insured is liable. Cover is of such importance that society intervenes to ensure that it is in place and effective.
4. The importance of this element is apparent from the way that insurers advertise their products as well as decisions of courts in common law countries—with the exception, however, of England: M. A. Clarke, The Law of Insurance Contracts
, 4th edn (London, 2002) (hereafter ‘‘Clarke’’), 30–9C.
5. K. Abraham, Distributing Risk
(New Haven, 1986), 60.
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