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
Commentators are speculating about a possible constitutional crisis, given that the House of Lords voted yesterday – 26 October – against the Government’s proposed reforms to tax credits. The noise about this issue has probably distracted attention from the less controversial Enterprise Bill, which began its Committee Stage in the Lords on 26 October. The discussions are scheduled to resume on 28 October and on 2 & 4 November.
At some stage during these four days, the Lords will address provisions in the Bill which deal with late payment of insurance claims. What the clauses do is to imply a term into every insurance policy that the insurer will pay valid claims in a “reasonable time”. This is a subjective test, so a “reasonable time” will vary with the circumstance of the risk, the claim and the necessary investigation. The crucial element of these changes will be that if the claim is not paid in a “reasonable time”, then the insurer would have breached the implied term and would therefore be liable for damages that, under normal contractual principles, flow from the breach. This is a new remedy in English law, but not in Scottish law.
Earlier versions of the ‘late payment’ clauses had been included in pre-legislative drafts of the Bill that became the Insurance Act 2015. The new remedy was deemed to be controversial, in the sense that there were some differing views about it in the market. For that procedural reason, it could not be part of a Bill (the Insurance Bill) that was following the special Parliamentary procedure for Law Commission proposals and thus the clauses were set to one side at that time. But, as noted above, they are now contained in a Government Bill and thus subject to the rigour of full debate in both chambers. As part of a Government Bill, we would therefore expect the measures to be agreed and taken forward, even if there remain some different views in the market about the potential effect of introducing a new remedy of damages for late payment of claims.
We will report on the outcome of the Committee Stage proceedings very shortly after the late payment clauses have been debated.
Written by Alistair Kinley, Director of Policy and Government Affairs.
Today, Wednesday 12th August, is the day when the next renewal of the policy just incepted / renewed is going to be subject to the new Insurance Act. Every party and participant in the placement process needs to be aware of the new obligations, the new remedies and the need to consider the wording of policies. Also, every participant in the process needs to be asking whether and how he will approach those new obligations. Whereas the Act seeks to re-balance the risk between policy holder and insurer, the policy holder needs to be aware of his own obligations. Similarly, brokers can also expect to be asked about (and indeed should be advising on) the new Act, the responses of insurers and the products being offered.
It has been six months since the Law Commission’s reforms to commercial insurance law was enacted. Since then, BLM’s Consultant, David Hertzell, together with a number of BLM partners, have been asked for their views on the likely impact of the change in the Law that is going to apply to all commercial policies incepted or renewed from 12 August 2016. BLM exhibited at both BIBA and Airmic Conferences where David also had the opportunity to make a presentation. BLM is very pleased to be able to produce the attached short interview which captures the wide feedback and advice from BLM on this subject. As the Law Commissioner who steered the changes through Parliament, David brings a unique insight into the early stages of implementation of the new law and how stakeholders are preparing themselves in the placement of risk.
Written by Terry Renouf, partner