Policyholder's Reasonable Expectations

by Yong Qiang Han

Overview

Over the past two decades, protecting contractual parties' reasonable expectations has incrementally gained judicial recognition in English contract law. In contrast, however, the similar 'doctrine' of 'policyholder's reasonable expectations' has been largely rejected in English insurance law. This is injurious, firstly, to both the consumer and business policyholder's reasonable expectations of coverage of particular risks, and, secondly, to consumer policyholder's reasonable expectations of bonuses in with-profits life insurance. To remedy these problems, this book argues for an incremental but definite acceptance of the conception of policyholder's reasonable expectations in English insurance law. It firstly discusses the homogeneity between insurance law and contract law, as well as the role of (reasonable) expectations and their relevance to the emerging duty of good faith in contract law. Secondly, following a review and re-characterisation of the American insurance law 'doctrine' of reasonable expectations, the book addresses the conventional English objections to the reasonable expectations approach in insurance law. In passing, it also rethinks the approach to the protection of policyholder's reasonable expectations of bonuses in with-profits life insurance through a revisit to the (in)famous case Equitable Life Assurance Society v Hyman [2000] UKHL 39, particularly to its relevant business and regulatory background.

Product Details

ISBN-13:	9781509900763
Publisher:	Bloomsbury Academic
Publication date:	11/03/2016
Pages:	280
Product dimensions:	6.14(w) x 9.21(h) x 0.69(d)

About the Author

Yong Qiang Han is a post-doctoral Research Fellow at the Centre for Banking and Finance Law, Faculty of Law, of the National University of Singapore.

Table of Contents

Foreword vii

Preface ix

Acknowledgements xi

Table of Cases xix

Table of Statutes xxxiii

1 Introduction 1

I An Anomaly 1

II Policyholder's Reasonable Expectations of Coverage and of Bonuses 3

III Structure of the Book 4

2 Contract Law and Insurance Law: the Homogeneity 7

I 'Special Nature' of Insurance Law, or of Insurance? 7

A The Sui Generis Nature of Insurance Law? 7

B The Special Economic Rationale of Insurance (versus Sales) 9

C One Legal Framework for Plural Types of Transactions 11

II The Common Legal Framework 12

A Formation of contract 12

B Performance of Contract: insurance Payment 14

Aleatory and Conditional Performance by Insurers 14

Insurance Payment in Contingency Insurance 14

Indemnity in Insurance and in Non-insurance Contract 16

C Remedies for Breach of Contract 20

III The Shared Principles of Interpretation of Contracts 21

IV Particular Differences-How Different? 23

A Insurance Contract and Utmost Good Faith 23

B Pre-contractual Duty of Disclosure 25

C 'Conditions' and 'Warranties' 28

V Conclusion 30

3 Rediscovering Expectations in Contract Law 31

I Expectations in Contract Formation and Damages 32

A Expectations in the Formation of Contract 32

B Expectations and the Binding Force of Contract 36

C Expectations, Contract Liabilities and Expectation Damages 39

II Reasonable Expectations in the Positive Law of Contract 41

III Reasonable Expectations in Contract Law: Just a Slogan? 44

IV Reasonable Expectations and Contract Interpretation 51

A Expectations and the Contextual Approach 51

B Expectations, Intention, Contract Purpose 53

Intentions and Expectations in Behavioural Science 53

Intentions and Expectations in Contract Law 54

Contraci Purpose, Intention and Expectations 58

V Conclusion 59

4 Relating Good Faith to Reasonable Expectations 61

1 The Relevance of Good Faith to Reasonable Expectations 62

II Good Faith in the Common Law of Contract 66

A Good Faith in English Contract Law 66

B Good Faith in Contract Law of Other Common Law Jurisdictions 73

Australia 73

Canada and the USA 76

Singapore 78

New Zealand and Hong Kong 81

Summary 83

III Insurer's Duty of Good Faith 83

A Mutuality of the Duty of Good Faith in Insurance Law 84

B Insurer's Pre-contractual Good Faith: Disclosure 85

Insurer's Duty to Disclose Material Circumstances 85

Insurer's Duty to Remind Policyholders of Non-coverage 88

Duty to Explain the Terms and Conditions? 89

C Insurer's Post-contractual Good Faith: Claims Handling 90

Duty to Handle Claims Promptly and Fairly 91

Duty to Provide Guidance? 93

Duty not to Abuse Avoidance or Termination of Contract 93

Duty in Relation to Defence and Settlement 94

IV Conclusion 96

5 Revisiting the Doctrine of Reasonable Expectations in American Insurance Law 98

I The Doctrine of Reasonable Expectations in the US: A Brief Overview 99

A What is its Origin? 99

B Controversies over the Doctrine of Reasonable Expectations 101

II Recharacterising the Doctrine of Reasonable Expectations: From'Doctrine' to 'Principle' 103

A Keeton's 'Characterisation System' 103

B Cases from 1998 to Date 107

Type 0-Rejection of DRE/PREC 107

Type 1.0-Ambiguity is the prerequisite for applying DRE/PREC 108

Type 1.5-Ambiguity is a prerequisite (with other rationales) 110

Type 2.0-Ambiguity is not a prerequisite at all 112

Type 3.0-Adopted conceptually, but without clear rationale 115

C Cases before 1998 117

Type 0-Rejection of DRE/PREC 118

Type 1.0-Ambiguity is the prerequisite for applying DRE/PREC 119

Type 1.5-Ambiguity is a prerequisite (with other rationales) 120

Type 2.0-Ambiguity is not a prerequisite at all 122

Type 3.0-Adopted conceptually, but without clear rationale 124

Type 4.0-Unclear whether DRE/PREC was accepted or rejected 129

D Rethinking the Doctrine of Reasonable Expectations under Keeton's 'Characterisation System' 131

E Dworkin and Abraham's Perspectives 134

III Conclusion 136

6 Reassessing the Objections to Policyholder's Reasonable Expectations of Coverage in English Insurance Law 138

I Policyholder's Reasonable Expectations of Coverage: Where Are We?-Consumer Insurance 138

II Addressing the Objections to Policyholder's Reasonable Expectations of Coverage 144

A Uncertainty and Inconsistency? 144

B Other Doctrines Will Do? 149

Presumption in Favour of Coverage 150

Contra Proferentem 152

Mistake 153

Insurer's Misrepresentation 154

Insurer's Waiver (or Election) and Estoppel 156

C No Public Policy Considerations? 157

Public Policies: 'Disabling' and 'Enabling 158

Insurance and the Decline of the Welfare State 161

Conceptions of Insurance 162

III Business Insurance and Policyholder's Reasonable Expectations of Coverage 164

A Reasonable Expectations in Relational Commercial Contracts 164

B Business Insurance as Relational 170

C A General Approach to Policyholder's Reasonable Expectations of Coverage in Business Insurance 174

D Whose Expectations Should Prevail in Business Insurance? 181

Insurer's Expectations 182

PREC1 Risk Pool Solvency and the Purpose of Insurance 185

E The Lingering General Concern 196

IV Conclusion 196

7 Policyholder's Reasonable Expectations of Bonuses in With-Profits Life Insurance 199

I Discovering Policyholder's Reasonable Expectations of Bonuses: Revisiting Equitable Life 201

A Salient Facts and Issues 201

B Policyholder's Reasonable Expectations of Bonuses in the House of Lords 203

C Policyholder's Reasonable Expectations of Bonuses in the Lower Courts 204

II Policyholder's Reasonable Expectations of Bonuses in the Actuarial Profession 206

A The Origin of the Concept in the Actuarial Profession 206

B Policyholder's Reasonable Expectations of Bonuses under the Guidance Note of the Actuarial Profession 209

C Policyholder's Reasonable Expectations of Bonuses and the Insurance Technical Actuarial Standard 211

III Policyholder's Reasonable Expectations of Bonuses in Insurance Regulation 212

A Policyholder's Reasonable Expectations of Bonuses and the Insurance Companies Acts 212

B From Policyholders' Reasonable Expectations of Bonuses to the Treating Customers Fairly' Principle under the 2000 Act 213

IV Reflections on Equitable Life in the House of Lords 216

A Contract Law Realism versus Formalism 216

B The Necessity Test for Implication of the Term in Equitable Life 217

C The Relevance of Background to Implication of Terms 219

V Conclusion 221

8 Conclusion 223

Bibliography 231

Index 239

Editorial Reviews

A thoroughly researched inquiry that is both broad in scope and nuanced in its analysis of case law and concepts. It not only re-examines and corrects much of the conventional wisdom regarding the reasonable expectations concept but also appreciates the application of the doctrine to the overall insurer-policyholder relationship as well as to coverage disputes...A fresh and interesting exploration that has both perspective and detail. The book makes insightful observations and marshals specific supporting evidence that requires rethinking of traditional views of both insurance law and contract law....Just when you thought everything had been said about the reasonable expectations "doctrine, +? Professor Han provides new and important insights that will prove valuable to scholars addressing the topic, judges deciding cases, and lawyers representing both insurers and policyholders.

This book provides a stimulating and critical review of a doctrine that is far from dead.

This sweeping study of the policyholder's reasonable expectations makes a strong case for placing greater emphasis on this notion in English insurance law. Analyzing the issue from both doctrinal and comparative law perspectives, it is a must-read for anyone in the field.

From the Publisher