There is nothing particularly controversial in clause 2, or indeed in clauses 3 to 8 and schedule 1. As the Minister said, the clause provides that the duty of fair presentation, which is set out in the remainder of the part, applies in the event of a variation to a non-consumer insurance contract as well as upon the initial agreement or the contract.
Clause 3 introduces a requirement on the insured to
“make to the insurer a fair presentation of the risk”
before the contract is entered into. That replaces existing duties in relation to disclosure and representations contained in the Marine Insurance Act 1906, but retains essential elements of those provisions in ensuring that the insured provides insurers with the information they require to decide whether to insure a risk and on what terms.
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Clause 4 relates to an issue that we debated last week in Committee. The clause defines what the insured knows, and ought to know, for the purposes of the duty of disclosure in clause 3, based on the insured’s duty in section 18 of the 1906 Act to disclose every material circumstance known to them, including everything which,
“in the ordinary course of business”,
ought to be known to them. There was some difference of opinion about the scope and applicability of the Bill’s phraseology, particularly the definition of “senior management” as
“those…who play significant roles in the making of decisions”.
We debated whether that definition was perhaps too narrow. Helpfully, the Minister told us that the Government had
“amended the explanatory notes to make it clear that the senior management is likely to include the board, but can also go beyond it, depending on the corporate structure of the relevant policyholder.”—[Official Report, Second Reading Committee, 26 January 2015; c. 8.]
She also gave us information about stakeholders who have commented on this and agree that the Bill’s drafting is appropriate. I welcome the move by the Government to tighten up the explanatory notes to deal with that question.
Clause 5 deals with the knowledge of the insurer. Clause 6 provides that what an individual knows includes not only what they actually know but “blind-eye” knowledge—that is, knowledge that they ought to have but have deliberately neglected to acquire. Clause 7 serves to ensure that a company or other principal is not fixed with knowledge of a fraud practised against it by its agent or office. Clause 8 provides the insurer with remedies if there is a breach of the duty of fair representation. Schedule 1 sets out the insurer’s remedies for “qualifying breaches” under this clause.
Given the assurances that we received and the changes that were made when we raised these points in Committee, I have no difficulty with these clauses.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Clauses 3 to 8 ordered to stand part of the Bill.