Law Commissions issue paper on misrepresentation and non-disclosure

The Law Commission of England and Wales and the Law Commission of Scotland propose two separate insurance regimes. The first relates to ‘consumer’ insurance and is mandatory. The second relates to ‘business’ insurance and may be ‘disapplied’ by contrary agreement.

Chris Nicoll

Scope

As expected, the first is much friendlier to the insured because it is assumed that consumers are the ‘shorn lambs’ ¹ for whom the winds of the common law need to be tempered. But it is notoriously difficult to draw a line between the two on the basis of relative sophistication, knowledge of insurance and of access to and the ability to assimilate expert advice. All depends on the circumstances. So a consumer who is a broker may know more about insurance than the proprietor of a small business. The number of employees of a business is not an infallible indicator of wealth, as with a one-ship company. Size may not reliably identify financial sophistication. It is common, for example, to form small companies to front large construction projects and, in the capital markets, it is common to use special-purpose vehicles to conduct extremely complex deals.