Utmost good faith

The nature of reform

In January 2006 the Law Commission launched its investigation into the operation of insurance law in the UK, with a view to wide-ranging reform. The initial process was ‘scoping’, in which the Law Commission invited representations as to the areas of insurance law which it ought to investigate. The result of the scoping exercise, detailed in a paper published by the Law Commission in August 2006, was the conclusion that the review should have a wide scope and should encompass both direct insurance and reinsurance. In particular, the following matters are to be reviewed in their own right: pre-contractual utmost good faith; post-contractual utmost good faith and fraudulent claims; warranties; insurable interest; the definition of insurance; the absence of any remedy in damages for late payment of a claim; and the Fires Prevention (Metropolis) Act 1774. Other matters are to be reviewed as pervasive rather than stand-alone issues. These are agency and co-insurance. The Law Commission also decided that subrogation was not a priority and would be looked at if time allowed, that the issue of worthless policies was probably a regulatory rather than a contractual matter and that contract certainty and the formalities of the creation of marine policies would not be reviewed. One of the initial suggestions by the Law Commission was the preparation of separate consumer and commercial insurance codes: these will not be in the report, although may constitute a subsequent phase of investigation. The response to scoping was followed, at the end of September 2006, with the publication of the Law Commission’s first ‘Position Paper’ on Misrepresentation and Non-Disclosure. The paper is specifically stated not to be a statement of final policy but is designed simply to promote discussion. A number of issues have been raised on which further views are invited.