On 29 October 2010, the Law Commission published an Issues Paper on whether the requirement for a formal marine policy under section 22 of the Marine Insurance Act 1906 should be repealed. Section 22 states that a contract of marine insurance will be inadmissible in evidence unless it is “embodied in a marine policy“.

The rationale behind section 22 can be traced back to the Stamp Act 1795 which imposed a stamp duty on all marine insurance policies. To ensure the parties paid this tax the section rendered those insurance contracts which were not formally stamped as “null and void“. While this stamp duty was abolished in 1970, the section has remained in force. Forty years on the section has no real effect in practice, as insurers will pay claims whether the insured has a written policy or not, but there remains the danger that an insurer could invoke it in order to prevent an insured proving its right to make a claim.

The Issues Paper advocates the repeal of section 22 and, in keeping with the current climate of reducing the burden of law and regulation on business, states that there should be no statutory requirements in order to create a valid contract of marine insurance. While recognising that it is good practice for the parties to enter into a written contract, it recommends that the formalities of such a contract are left to market participants operating under normal contractual rules.

The Issues Paper also suggests that following the repeal of section 22 the other 166 references in the 1906 Act to a “policy” or “policies” be re-interpreted as references to insurance contracts.

The Law Commission seeks responses to its proposals by 17 January 2011. If you would like to view the Issues Paper, please click here.