Successfully negotiating claims since 1867
You may have seen that in July 2016 we posted on this site details of The Insurance Act 2015’s newly introduced proportionate remedy for non-disclosure or misrepresentation that is neither deliberate nor reckless.
Essentially, claims can be reduced by the proportion that the premium paid bears to the premium that would have been paid had insurers had the proper information.
At Thompson and Bryan we have had a couple of cases where that remedy has been applied. And we have found that there is still a level of misunderstanding among insurers about the proper application of the penalty. In particular, unlike average (which can still be written into commercial policies but only with the very specific consent of both parties) the premium-proportionate formula is versatile and is designed to be applied to classes other than property.
One of the matters we have at the moment is essentially a legal liability and expenses cover where inadvertent misstatement of payroll levels was the activating feature and insurers have been attempting to have the policyholder bear a high share of the damages.
Insurers bear the burden of proof in demonstrating what the premium would have been. This requires disclosure of many underwriting materials showing how rates were and would have been calculated. These must all be materials in existence and in use at the relevant policy renewal or endorsement; we have had to adopt various techniques for checking the validity, including the interrogation of metadata and, in some cases, requiring evidence of application of the contents of those documents to comparable risks contemporaneous with the policyholder’s insurance. The range of relevant documents is wide, and we have with underwriting experts developed extensive wish lists for examination.
There is also a very specific formula set out in the Act, and some insurers have demonstrated a misunderstanding of this, resulting in lower offers to our clients than are due to them.
Should you need any help in this still novel area of understanding, please get in touch