REFORMING INSURANCE LAW: - Law Commission

Matters in the 1984 Act already a part of domestic law
8.46 Finally, there is a set of provisions dealt with by the 1984 Act which are already regulated
by English law.
Arbitration
8.47 There is a prohibition on use of arbitration clauses in insurance policies in s 43 of the 1984
Act. English law does this only in respect of consumer policies, under the Arbitration Act 1996,
ss 89-91, sections which have the effect of applying the Unfair Terms in Consumer Contracts
Regulations 1999 to arbitration clauses.
Third party rights
8.48 The Contracts (Rights of Third Parties) Act 1999 abolished the doctrine of privity of
contract in England. In its stead, the Act allows a person who is the intended, named, identified
or identifiable beneficiary of a contract to enforce any rights conferred on him by the contract.
The legislation applies to insurance, and on the face of things a third party beneficiary under a
policy is entitled to bring suit against the insurers. Regrettably, virtually all policies issued since
the Act came into force in May 2000 contain an express exclusion for the Act, so that the
position remains as it was at common law and a third party beneficiary has no claim unless the
assured acted as agent 547 or trustee for the beneficiary.
8.49 The Australian legislation, by contrast, has anticipated the 1999 Act in the context of
insurance, but does not permit its exclusion. Under s 48 of the Insurance Contracts Act 1984, 548 a
person who is not a party to a contract of insurance but who is specified or referred to in it (by
name or otherwise) has a right to recover his loss from the insurers on the same terms as, and
subject to the same defences available against, the assured himself. The principle has been
extended to ordinary life policies and policies taken out in connection with a Retirement Savings
Account. 549 The section has generated a significant amount of litigation by reason of its loose
drafting, 550 and the Law Commissions will plainly not contemplate adopting a similar provision
given that the English 1999 Act is a far clearer piece of legislation. There remains the possibility
that the 1999 Act could be made compulsory in the context of insurance, but the prospect of this
is remote and there is no reason why insurance should be treated differently to other contracts.
8.50 The position of third party beneficiaries was given detailed consideration by Treasury
Review II, and its recommendations 551 have been adopted by the draft Insurance Contracts
Amendment Bill 2007. Treasury Review II noted that s 48 is the only provision which deals with
547
The agency has to be disclosed: Talbot Underwriting Ltd v Nausch Hogan & Murray, The Jascon 5 [2006]
Lloyd’s Rep IR 531.
548
Based on ALCR 20, paras 121-124.
549
Insurance Contracts Act 1984, ss 48A and 48AA respectively.
550
Mann, paras 48.10 to 48.40; Sutton, paras 2.79 to 2.98.
551
Recommendations 10.2 to 10.4.
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