Successfully negotiating claims since 1867
Much has been written about the Insurance Act 2015 and most of our broker clients will be familiar with the duties of fair presentation and the lessening of the severe consequences of breaches of warranties. The new provision about damages for late payment by the insurer is one that we expect to affect practical case handling, and it is practice rather than law that’s worth commenting on here.
Essentially, the new S.13A of the Act makes an insurer liable for damages if due payments are not made within a reasonable time. As with all legislation that relies on reasonableness there is much scope for interpretation, and the Act recognises this in setting out the factors that may influence the definition of reasonableness. All we can say is that in interpreting those elements is “it depends”, each case having its own identity and circumstances. The damages payable will be calculated on the same basis as the law applies to contract disputes generally, and could be substantial on, for example, a business interruption claim where the business suffers from unreasonably late payment.
In any contract dispute contributory negligence by the claimant is a defence. We at Thompson and Bryan have always worked to ensure that our clients get paid as quickly as possible – whether “possible” will be the same as “reasonable” is a question likely to engage insurers’ and lawyers’ thoughts – and we have adopted procedures to alert insurers to our awareness of policyholders’ rights under the new provisions and to ensure that those rights are not diluted by policyholder failures.
The financial stringency of the last few years has seen redundancies in both insurers’ and adjusters’ operations, leading to longer settlement times and we hope that this trend will reverse as liability for damages become apparent. We shall now be working with our policyholder and broker clients on each case where we believe delay is unreasonable to calculate the insurer’s possible exposure to damages which we can use as a negotiating lever.