Duty of disclosure could be abolished

The Law Commission is considering the abolition of the duty of disclosure, at least for consumers, u...

The Law Commission is considering the abolition of the duty of disclosure, at least for consumers, under major proposals to overhaul current insurance contract law.

Releasing its first 'issues' paper on misrepresentation and non-disclosure at a seminar organised by law firm Beachcroft, the Law Commission has proposed replacing the insured's duty to disclose information with a duty on insurers to ask specific questions.

In relation to misrepresentation, the Law Commission is suggesting that the test for materiality would be based on the "reasonable insured" rather than the "prudent insurer".

New remedies would follow the Financial Ombudsman Service's approach and would include proportionality.

Peter Tyldesley of the Law Commission explained that the current legal position was untenable because different rules were being applied by the courts under the FSA rules, as well as by the Financial Ombudsman.

Richard Evans, a partner and head of the policy coverage unit at Beachcroft, welcomed a rebalancing of the law. However, he said: "I am concerned by the proposed distinction between consumer and business cases. A distinction between insureds that have and have not received professional advice in preparing their proposal forms would better tackle the mischief of the current law."

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