In our series “Elvis blogs the Insurance Act” we considered some of the issues that arose as Insurance Act compliant policies were formally incepted on 12 August, renewals took place or variations to existing policies were applied.
We concentrated solely on the Insurance Act but to do so ignores some other aspects of the Law Commissions’ programme of reform of insurance law that we should address and a couple of areas of concern which arise from the “entrepreneurship” of the claims management sector.
The first may already be upon us and relates to the disclosure obligations of the Third Party (Rights against Insurers) Act of 2010 that applies (if apparently a little belatedly) from 1 August 2016. We should be very clear that the Act is welcome and will smooth the process and reduce the costs of dealing with coverage issues where a policyholder is insolvent.
The concern arises because the obligations are imposed on “a person who is able to provide information” about “whether there is a contract of insurance that covers the supposed liability or might be regarded as covering it”.
The information, it will be noted, is quite wide and imposed on an unspecified class of persons but which will include not only the insolvent policyholder, the officers of the company and perhaps former employees but also brokers, liquidators and insurers. The information requested has to be disclosed within 28 days of receipt of the notice. The concern here is that a series of requests for information might be made and applications promptly issued where the aim is the generation of legal costs rather than the search for an insurer of an insolvent policyholder.
A similar concern arises on 4 May next year when the “late payment” implied term will apply to new, renewed or varied insurance policies.
Is it too much of a stretch to anticipate the text-blitz: “Was your insurance claim paid late? New law allows you to claim? Text 1234”. Is this a case of “suspicious minds”? One hopes not, but experience does tell us that we should beware of the problem and start to think about some strategies to avoid being “Caught in a trap” or “In the Ghetto” of spurious applications and the associated costs of dealing with these situations – and again with many apologies to Elvis.
Written by Terry Renouf, partner, BLM
