The Insurance Act 2015 will apply to new policies or variations from tomorrow, Friday 12 August – the “Glorious 12th” of the hunting season.
I have considered in my earlier blogs this week (and indeed within many of the papers, FAQs in the Time for Change area of the BLM website) those areas of the new law which might be subject to challenge or dispute after 110 years of “old” law and practice.
We suggested that “fair presentation”, being more evolutionary than revolutionary, although widely discussed might be less difficult for the market than anticipated. Certainly some of the nuances will need judicial determination but there is some existing case law for guidance.
One of the areas that does not have a similar corpus of law is around the “proportionate remedies” that will be applied where there is a breach of the new duty of fair presentation. This is an area that is new – the remedy of avoidance continues to be available but is supplemented by the option to apply the terms that would have been in place had the policyholder complied with its duty of fair presentation or adjustment of the claim, to reflect an underpaid premium.
These new remedies, avoiding as they do the zero/hero alternative of policy avoidance, seem very likely to be the likely outcome in many disputes but there is no case law to guide the judiciary on the point and consequently no precedent for insurers or policyholders. Disclosure of documentary and witness evidence will be more extensive (and therefore more costly) and experts more extensively engaged to determine the terms that would have been offered, had there been a fair presentation.
It is also worth reflecting on the fact that, to the extent we can point to market practice, in general the “additional premium” route has, to date, been preferred as a commercial response to the difficult situation of misrepresentation. Some insurers have chosen to “contract out” of the Act and apply the AP solution to policyholders as a contractual term but in the main the Act, with its remedies, has been adopted by the market, Thus, we have a new law with little or no guidance in case law where market practice has in general been to apply a different solution.
I observed in a previous blog that there had been a lot of conversation around the duty of fair presentation and relatively little around that of the “new” remedies that would apply. In the context of making a judgment as to where the likely areas of Insurance Act dispute might be we consider that “remedies” and “contracting out” will be an example of “a little more bite” following “a little less bark” – to slightly misquote Elvis.
Written by Terry Renouf, partner, BLM