As we have reported previously, the English and Scottish Law Commissions are currently undertaking a wide ranging review of insurance contract law. Click here to read our previous post on this topic. On 14 March 2008, the British Insurance Law Association hosted a lecture at Lloyd’s of London on the Commissions’ latest set of proposals for reform, concerning the law of insurable interest (a doctrine requiring that a policyholder must gain a benefit from the preservation of the subject matter of the insurance or suffer a disadvantage should it be lost). Click here for full details of the proposals.

The lecture was given by David Hertzell and Elizabeth Waller of the (English) Law Commission.  They outlined their proposed reforms, which include the following:

    •  abolition of the insurable interest requirement for indemnity insurance contracts;
    •  for life insurance, an expansion of the categories of interest required for people to insure each other’s lives; and
    •  a recommendation that contracts without the necessary insurable interest should be void rather than illegal.

The lecture was attended by a large number of representatives from a broad section of the insurance and reinsurance industry and a lively debate ensued. It is clear that, even though the issue of insurable interest rarely arises in the context of litigation or arbitration, the Commissions’ proposals are arousing a great deal of interest. The Commissions welcome comment and feedback and respondents are encouraged to make their views heard by writing to commercialandcommon@lawcommission.gsi.gov.uk by 11 April 2008.

The Commissions will next consider the issue of post-contractual good faith and their paper on this is expected later this year. We will, of course, continue to report developments here on insurereinsure.com.