Insurance Act 2015; a little less arbitration

Four months have passed since the Insurance Act became law in August.  Too early for any major court decisions but, nonetheless, time enough for a few preliminary observations.  Despite some initial doubts and wobbles, the market has largely taken the new law in its stride.  Policies have been updated, training sessions have been provided and processes have been refreshed.  Some have focused on gaining market advantage, whilst others have taken a more technical approach. As with all change some have adapted better than others.  In some cases risk managers have been surprised at what their reasonable search revealed and underwriters by what their old policies contained.  Generally however, more thought seems to have been given to the placement process and in addition, the better prepared brokers have examined their role, procedures and what liabilities they can assume.

The Insurance Act is principles based but the facts behind any disputes will be infinitely variable.  Was the presentation fair, was the search for information reasonable, were individuals “senior management”, was the warranty a risk migration term or did it define the risk?  All of these questions could give rise to new test litigation.  If the Insurance Act follows CIDRA then the nature of disputes may alter too, moving away from misrepresentation and non-disclosure towards post-loss conditions, the extent of cover and the effect of policy terms.

We should expect some significant litigation over the next few years which will give further guidance to the market.  However, many policies contain binding arbitration clauses which, as several senior judges have observed, hinder the development of the common law.  The process may therefore take longer than would be ideal.  Whatever the courts eventually decide whether the Law Commissions will have achieved their aims of improving practices to support the UK insurance industry abroad and assist its reputation at home may not be known for some time yet.

Written by David Hertzell, consultant

Late payment, supplier responsibilities and contractual terms

Insurance law reform has been a long process with Law Commission consultations starting in the mid “noughties”, through CIDRA in 2012, the Insurance Act in early 2015 and the long haul of implementation to commencement already now more than 100 days ago.  So it is all too easy to relax, having passed the finishing line but equally important to remember that full implementation will take place when the “late payment” clause comes in to effect next year.

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Insurance Law and London Buses

Today saw the enactment of the Enterprise Bill 2015 which at the stroke of the Royal pen transforms itself to the Law of the land as the Enterprise Act 2016. The significance for the insurance industry arises from sections 28 to 30 which introduce in to the Insurance Act 2015 the “late payment” clauses that were felt to be inappropriate for the Law Commissions’ special procedure for non-controversial legislation in late 2014. The Government was however persuaded of the merit of the original recommendations and included the provisions in the Enterprise Bill now enacted.

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