The Airmic Conference this year (June 2017) saw the publication of a paper considering the experience of practitioners in the ten months since implementation of the Insurance Act in August 2016. At this point the vast majority of commercial policyholders will have been through at least one Insurance Act process and thus a report from Airmic, which championed the reforms for that sector, does carry weight. At the conference, Huw Edwards also interrogated the “C-suite” Leadership Panel of brokers and insurers on their collective experience of the Act. The conclusion: so far so good but none wanted to be involved in the first dispute. Plainly the first judgment is going to attract considerable interest and commentary and so the reputational aspect is going to act as a weighty disincentive but which of the areas of the Act are working well and where are the first disputes likely to arise? Fair presentation, remedies for breach or policy terms?
We have presented, lectured, workshopped, written, blogged (obviously) and listened very extensively on the Insurance Act 2015. Many questions and concerns and much of the press coverage and other commentary has centred around the duty of fair presentation. Will this be the area of substantial dispute, as theory is applied to practice, and claims start to test “Insurance Act” policies that were written from 12 August 2016?
The question that should be addressed is whether it is this part of the Act that, although widely discussed, is more contentious than other areas. The answer, because lawyers always caveat, is that there will certainly be disputes.
The first area of concern is around the “threshold test” for the policyholder to provide “sufficient information” which puts the insurer on notice to raise questions. Although this does mirror “waiver” issues under the old law one can envisage that there will be disputes. Secondly, the duty of fair presentation does preclude “data dumping” with the wholly new requirement that a fair presentation must be in a “clear and accessible format”.
Does “wholly new” mean “wholly contentious”? In fact, whilst we can anticipate some litigation around the issues “fair presentation” will not, we predict, prove to be area of substantial dispute. In the first instance there is the practical control that an underwriter can exercise to decline to offer terms when “data dumped”.
Additionally, and of benefit to the policyholder there is the corresponding question that might prove difficult for the underwriter to answer if the defence is subsequently raised: “Why did you offer terms if you were not happy with the format of the presentation?” It is likely too that the issue of “clear and accessible” will be a question of fact at first instance and will not often trouble the higher Courts.
The issue of “fair presentation” itself does carry greater scope for dispute of course. There will be arguments around the “sufficiency” of disclosure and underwriters enquiries but there is some case law for guidance which should assist. Thus, referencing Elvis again, we conclude: pre-commencement aggravation and less (satisf)actioning me!
Written by Terry Renouf, partner, BLM
Any new law does bring some uncertainty even where carefully drafted.
The Law Commission was aware of those concerns and the Insurance Act 2015 deliberately uses terms that, although not “modern”, reflect particular terminology familiar to insurance practitioners and judges.
This has been done to avoid the uncertainty that change can bring. However as sure as a lawyer follows an ambulance there will be some litigation that will arise from the Act. One would certainly hope, with legislation that was carefully constructed by industry consultation, that those disputes will be around issues that are generally interpretative of the new areas of the law, and not parties taking points either because the law proves to be poorly drafted or, like Mount Everest, because it is there. And so, having worked so hard to explain and prepare customers for the new law (and listened to concerns) where do we think might be the problem areas? Fair presentation? Proportionate remedies? Contracting out? Warranties? Irrelevant terms? The list of itself could extend and even in its short form, suggests that the Supreme Court might be engaged fairly frequently.
Our overview is that this is a good piece of legislation that will stand the test of time and will outlast the career of this blogger and most of the readers.
Disputes will arise, some thrown up by unusual facts and some by the new law: the question is which areas of the new law will create all this aggravation. I consider this in my next blogs.
Written by Terry Renouf, partner, BLM
Although Insurance Act “day” is formally the 12 August 2016, it has been a reality for any policyholder or underwriter for some time: a placement is not (or should not be) conjured up overnight.
The “fair presentation” (and of course the disclosure of every material fact under the “old regime”) should be the result of a careful consideration of assessment of risk before inception.