The Law Commission’s Working Paper No. 73 entitled “Insurance Law—Nondisclosure and Breach of Warranty”, published in 1979, has been speedily followed by their final Report1 in 1980. The Law Commission has taken into account representations made to it and generated by the Working Paper and presents in its 165-page Report a detailed examination of the topics within its terms of reference, namely the liabilities and rights of insurers and insureds in relation to the problems of non-disclosure; misrepresentation; breach of warranty; special conditions, exceptions and terms and increase and decrease of risk. These have been examined in the light of earlier views expressed in the Fifth Report of the Law Reform Committee2 and in a draft EEC Directive.3 The final recommendations, which call for a rejection of the EEC Directive, suggest the need for important changes in several insurance law principles. A Draft Bill of 15 clauses is also included. It is hoped that government may act as speedily in implementing the recommendations as the Law Commission have in presenting them.

It is proposed here to look in some detail at the faults presently existing in our insurance rules, both in law and in practice, and to examine the main recommendations for change.

It is perhaps ironic that insurance law, which for a century or more escaped major legislative change or judicial comment, should in recent years have been exposed not only to criticism in the courts but also had to face major administrative reorganisation brought about, at least in part, by Britain’s entry into Europe.4 The Law Commission was faced with a proposed EEC Directive calling for changes in insurance contract law and an earlier Law Reform Report (1957) which had generated no legislative response. Added to this was the fact that the insurance industry itself had been prompted into issuing Codes of Practice that partially answered some of the growing criticisms.

To suggest changes out of step with the Directive might well lead to legislation that within a short time would require further major amendment to meet the demands of