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Insurance Bill [HL]

Volume 758: debated on Thursday 8 January 2015


Clause 4: Knowledge of insured

Amendment 1

Moved by

1: Clause 4, page 3, line 16, leave out from “(whether” to “the” in line 17

My Lords, in moving Amendment 1, I shall also speak to Amendment 2. In the amended Bill, Clause 4(6) provides that, for the purposes of the duty of fair presentation of the risk, the insured “ought to know” what should have been revealed by a “reasonable search of information” available to it.

Some of the evidence we heard in Committee made the case for the Bill explicitly confirming that the “reasonable” search may extend to persons covered by the insurance contract but who are not the insured in the sense of being a contracting party. Noble Lords will recall that my noble friend Lady Noakes and the noble and learned Lord, Lord Woolf, put forward amendments to this clause in Committee stating that the reasonable search may extend to persons who could benefit from the contract. The Government were unable to agree with the specific wording of those amendments, and they were subsequently withdrawn.

However, we agreed to take the issue away and consider whether amendments needed to be made to ensure that the intended scope of the clause is clear. The Government consider that such clarification would benefit the Bill, and Amendments 1 and 2 seek to address this issue. As we discussed in Committee, what is a reasonable search of information will depend on the type of cover an insured seeks and the type of entity it is. It is important that Clause 4(6) expresses a broad principle that is flexible enough to take account of the wide variety of insurance policies and types of cover which are bought in the non-consumer context.

Amendment 2 clarifies that “information” which an insured ought to know may include information held by a person other than the insured, specifically mentioning that this may include,

“a person for whom cover is provided by the contract of insurance”.

This makes clear that persons benefiting from the contract could come within the scope of the insured’s reasonable search. I believe that this was at the heart of the amendments put forward by my noble friend Lady Noakes and the noble and learned Lord, Lord Woolf, and I hope that they are content with the drafting we have produced on this in Amendment 2. These amendments will improve the Bill, and I hope that the House can support them. I beg to move.

My Lords, in accord with the approach adopted by the Minister throughout the discussions on this Bill, I would like to acknowledge the help that he gave, which was something that I and the noble Baroness, Lady Noakes, were looking for.

Amendment 1 agreed.

Amendment 2

Moved by

2: Clause 4, page 3, line 18, at end insert—

“( ) In subsection (6) “information” includes information held within the insured’s organisation or by any other person (such as the insured’s agent or a person for whom cover is provided by the contract of insurance).”

Amendment 2 agreed.

Amendment 3

Moved by

3: After Clause 10, insert the following new Clause—

“Terms not relevant to the actual loss

(1) This section applies to a term (express or implied) of a contract of insurance, other than a term defining the risk as a whole, if compliance with it would tend to reduce the risk of one or more of the following—

(a) loss of a particular kind,(b) loss at a particular location,(c) loss at a particular time.(2) If a loss occurs, and the term has not been complied with, the insurer may not rely on the non-compliance to exclude, limit or discharge its liability under the contract for the loss if the insured satisfies subsection (3).

(3) The insured satisfies this subsection if it shows that the non-compliance with the term could not have increased the risk of the loss which actually occurred in the circumstances in which it occurred.

(4) This section may apply in addition to section 10.”

My Lords, Amendment 3 is, with a few slight amendments, the text which the noble and learned Lord, Lord Woolf, put forward in Committee concerning terms not relevant to the actual loss. It is intended to prevent an insurer from relying on a policyholder’s non-compliance with a warranty or other contract term in order to avoid liability for an insurance claim for loss of an entirely different kind.

From the outset, the policy aim behind this amendment has been generally well supported. There were some concerns about the drafting of the clause, which meant that it did not achieve a sufficient consensus of support such that it could be introduced as part of an uncontroversial Bill. The text of this amendment was proposed and consulted on by the Law Commission after the introduction of the Bill as a drafting solution which, it was hoped, would be suitable for this non-controversial parliamentary procedure.

I am very pleased that the written and oral evidence put to the committee, together with the backing of the committee members themselves, has demonstrated a strong body of support for this formulation. As such, the Government consider it suitable to be included in this Bill. It complements the existing Clause 10, which makes changes to an insurer’s remedy for breach of warranty. I beg to move.

Amendment 3 agreed.

Clause 12: Remedies for fraudulent claims: group insurance

Amendment 4

Moved by

4: Clause 12, page 6, line 32, leave out subsection (1) and insert—

“(1) This section applies where—

(a) a contract of insurance is entered into with an insurer by a person (“A”),(b) the contract provides cover for one or more other persons who are not parties to the contract (“the Cs”), whether or not it also provides cover of any kind for A or another insured party, and(c) a fraudulent claim is made under the contract by or on behalf of one of the Cs (“CF”).”

My Lords, I shall speak also to Amendments 5 to 9 and manuscript Amendment 10A, which has been tabled in substitution for Amendment 10. The amendments respond to representations made to the committee that Clause 12 on fraudulent claims in consumer group insurance should be extended to group insurance contracts in the non-consumer context. My noble friend Lady Noakes tabled amendments on this point in Committee. The Government supported this change in principle but were unable to support the specific amendments suggested by my noble friend. As such, her amendments were withdrawn on the basis that the issue would be taken away and considered further.

We have now had the opportunity to consider the amendments needed to the Bill in order to effect this change. Clause 12 currently provides that where a member of a group consumer insurance contract makes a fraudulent claim, the insurer has a remedy against the fraudulent group member but the remaining members of the group policy are protected. Amendments 4 and 5 extend the application of Clause 12 to the non-consumer context, and indeed in respect of contracts that cover both consumers and non-consumers as group members under the same policy. Amendments 6 and 7 correct a small error in Clause 12(3) that was spotted when drafting the main amendment to the clause.

Amendments 8, 9 and 10A deal with contracting out. In the consumer context, an insurer will not be able to put a consumer group member in a worse position than they would be in under Clause 12. In the non-consumer context, an insurer will have to comply with the transparency requirements if they wish to put a group member in a worse position. These provisions are consistent with the contracting-out provisions generally, and are a necessary consequence of extending Clause 12 to non-consumers. I should explain that the only difference between Amendment 10A and Amendment 10, which it replaces, is that the various cross-references to other sections have been corrected.

I believe that these amendments fully address the desire of the committee, particularly my noble friend Lady Noakes, and a number of the committee’s witnesses to extend the application of Clause 12 to the non-consumer context. These are uncontroversial amendments and I hope therefore that noble Lords can support them. I beg to move.

My Lords, I thought it would be appropriate for us to say that we support these amendments. It is a good example of Parliament working to improve a valuable service industry, enhancing its position globally. That is important because the UK is a world leader in this. It is not a subject that I profess a great deal of knowledge about but I cannot help having a slight ironic feeling. My late father, who was a very successful insurance agent, would have been pleased to hear my contribution, brief though it is.

Amendment 4 agreed.

Amendments 5 to 7

Moved by

5: Clause 12, page 6, line 42, leave out “consumer”

6: Clause 12, page 7, line 7, after first “the” insert “first”

7: Clause 12, page 7, line 10, at end insert—

“( ) the second reference to “the insured” in subsection (1)(b) is to A or CF,”

Amendments 5 to 7 agreed.

Clause 14: Contracting out: consumer insurance contracts

Amendment 8

Moved by

8: Clause 14, page 8, line 3, leave out paragraph (b)

Amendment 8 agreed.

Clause 15: Contracting out: non-consumer insurance contracts

Amendment 9

Moved by

9: Clause 15, page 8, line 18, leave out subsection (3)

Amendment 9 agreed.

Amendment 10A (in substitution for Amendment 10)

Moved by

10A:After Clause 16, insert the following new Clause—

“Contracting out: group insurance contracts

(1) This section applies to a contract of insurance referred to in section 12(1)(a); and in this section—

“A” and “the Cs” have the same meaning as in section 12,

“consumer C” means an individual who is one of the Cs, where the cover provided by the contract for that individual would have been a consumer insurance contract if entered into by that person rather than by A, and

“non-consumer C” means any of the Cs who is not a consumer C.

(2) A term of the contract of insurance, or any other contract, which puts a consumer C in a worse position as respects any matter dealt with in section 12 than that individual would be in by virtue of that section is to that extent of no effect.

(3) A term of the contract of insurance, or any other contract, which puts a non-consumer C in a worse position as respects any matter dealt with in section 12 than that person would be in by virtue of that section is to that extent of no effect, unless the requirements of section 16 have been met in relation to the term.

(4) Section 16 applies in relation to such a term as it applies to a term mentioned in section 15(2), with references to the insured being read as references to A rather than the non-consumer C.

(5) In this section references to a contract include a variation.

(6) This section does not apply in relation to a contract for the settlement of a claim arising under a contract of insurance to which this section applies.”

Amendment 10A agreed.

House adjourned at 5.42 pm.