Welcome to Howe Maxted Group-business and private clients-insurance broker

Cookie Laws within the EU

Allow Cookies

Click here for more information regarding cookies.

Competitive personal insurance for your family home, car and holidays

Call us on 020 8309 1717

THE ENTERPRISE ACT 2016 â€“ NEW RIGHT FOR POLICYHOLDERS Published on the 2nd August 2017

Passed on 4 May 2016, the Enterprise Act 2016 (the â€œActâ€), now gives policyholders a potential right to claim damages in the event of late payment of claims. These provisions came into effect on 4 May 2017 and apply to every (re)insurance policy placed or renewed on or after this date, if it is subject to the laws of England and Wales, Scotland, or Northern Ireland. The provisions are an amendment to the Insurance Act 2015.

NEW ACT

Under the Act, there is an implied term of every contract of insurance that if the insured makes a claim under the policy, the insurer must pay any sums due within a reasonable time. Breach of this implied term may give rise to a claim against the insurer for damages.

The Act provides that a "reasonable time" includes a reasonable time to investigate and assess the claim. What is a "reasonable time" will depend on the relevant circumstances; however the Act provides examples of matters which may be taken into account, including:

The type of insurance
The size and complexity of the claim
Compliance with relevant statutory or regulatory rules or guidance
Factors outside the insurer’s control

The Act also provides that if an insurer can show there were reasonable grounds for disputing the claim (whether in relation to liability or quantum), the insurer will not be in breach of the implied term merely by failing to pay the claim while the dispute is continuing.

COMMENT

In some circumstances, damages for late payment of claims may offer an important remedy for insureds and may provide an incentive for insurers to process and pay claims properly. The Act is certainly a useful weapon in the insured’s armoury, and will give insureds and your, as their broker, an additional negotiating point with insurers. However, there are significant hurdles to a successful claim for late payment.

In order to recover damages for late payment, an insured would have to show that:

The insured has a valid claim under the policy; and
The insurer has failed to pay within a reasonable time; and
The insured has suffered loss, which was caused by the insurers breach of the implied terms; and
The loss suffered by the insured was foreseeable (that is, the loss suffered is the type of loss that would have been contemplated by the insure and the insured at the date of the insurance contract was entered into, had thought bene given to the issue).

Furthermore, the insured will not be able to recover any loss that could have been avoided by taking reasonable steps.

As such, the Act does not give insures carte blanche to claim or recover damages from insurers in all cases. The Act contains a number of defences for insurers, and the courts will no doubt take into account the fact that claims – particularly complex ones – can often justifiably take considerable time to investigate.

While the changes provided for in the Act are a very positive step forward for insurers and will encourage insurers to increase the efficiency of their claims handling processes, it is unlikely to open the gates to a flood of successful litigation against insurers.

The above is published in association with Marsh Ltd