Insurance Companies and Advice
Along with many others who know the industry, David Rossmiller is upset about a Bloomberg story. He protests:
It's not up to your insurance company to make sure you have enough liability insurance to protect your assets if you hit someone with your car, or to make sure you buy enough property coverage to replace your jewelry, or to sit down at your table and make sure you understand you are not covered for earthquakes or floods. First, the law presumes that you the consumer know how much insurance you need, and if you don't get it, that responsibility is yours. Second, this is the theory of a standard-form contract -- the market eliminates the transaction costs of having to negotiate with every person in the world. In return for these savings, it is legally presumed you have read and understood the contract, whether you did or not.... So what's the problem ? The contract said what they would get, they just didn't read it.
Well, I can think of a number of problems with those protests:
- The process of dis-intermediation is now so advanced that, arguably, insurers cannot pretend that the policyholder is not in fact relying on them to do what the broker used to do i.e. advise on levels of cover;
- The insurer's duty of good faith arguably bolsters the latter argument;
- As lawyers, we often forget how arcane is even the simplest standard-form contract of insurance. Interpretation by an expert is the only reliable one;
- In theory, standard-form contracts and dis-intermediation benefit the consumer as well as the provider. In practice, the distribution of the benefits is very uneven, and the only casualties are found among consumers.
Useful Legal Update source
UK Tort Reform
The Compensation Act 2006 became law during the summer. The interesting sections, for me at least, are 1 and 2:
1 ... A court considering a claim in negligence or breach of statutory duty may, in determining whether the defendant should have taken particular steps to meet a standard of care (whether by taking precautions against a risk or otherwise), have regard to whether a requirement to take those steps might-
(a) prevent a desirable activity from being undertaken at all, to a particular extent or in a particular way, or
(b) discourage persons from undertaking functions in connection with a desirable activity.
2 ... An apology, an offer of treatment or other redress, shall not of itself amount to an admission of negligence or breach of statutory duty.
I have omitted the headings, but the above is otherwise the complete text of those sections. See the full statute here.
Riyad BAnk v Ahli United Bank
This is a really significant decision of the English Court of Appeal issued last week. It develops and clarifies the reasoning in Henderson v Merrett [1995] 2 A.C.145, and is the latest in the line starting with Hedley Byrne and continuing through Caparo v Dickman. I was not surprised to see Buxton L.J. say that "we were told that the issues raised by this case [on duty of care]were of some general interest in commercial circles. "
To condense a detailed series of judgments into one paragraph is unfair, unwise and ultimately misleading but for the purpose of this short note, the following may be found helpful pending a full reading:
"... in a case where there have been and have been expected to be direct dealings between adviser and advisee, a contract that causes the adviser to pass his advice through a third party [will not necessarily] as a matter of law protect the adviser from liability to the advisee. All will depend on the particular circumstances ..."
Riyad Bank & Ors v Ahli United Bank (UK) Plc [2006] EWCA Civ 780 is available on www.bailii.org. Thanks again to CMC Cameron McKenna (www.lawnow.com) for the "heads-up".
Wildgust v Norwich Union
Fergus O'Rourke
in Negligent Mis-statement
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The Irish Supreme Court has recently issued its decision in the case of Wildgust v Norwich Union.
The question for the court was whether a misleading answer given to Hill Samuel, who had an interest in a life policy, which answer did not mislead the plaintiff policyholder, could nevertheless found a claim in negligence against the insurance company.
The Supreme Court , reversing the High Court, said that it could. I will have more to say about this case in the course of the next few weeks, I suspect. Read the decision at
http://www.bailii.org/ie/cases/IESC/2006/S19.html