UK Law and Practice Contributed by: Clare Swirski, E. Drew Dutton, Hugo Laing and Rosamund Wood, Debevoise & Plimpton LLP
implement the IDD. The IDD is implemented in the UK through the FSMA and associated statutory instru- ments, as well as through the FCA Handbook. The FCA is responsible for the authorisation and regu- lation (prudential and conduct) of intermediaries oper- ating in the UK. Every person in the intermediation chain from customer to insurer must be authorised or exempt. Intermediation is defined widely to include arranging a contract of insurance, making arrange- ments with a view to someone entering into a contract of insurance, dealing in a contract of insurance as agent, advising on a contract of insurance or assisting in the administration and performance of a contract of insurance. A lighter conduct regime applies to reinsur- ance intermediation. Rules for intermediaries range from compliance with capital and professional indemnity insurance require- ments through training and competence requirements to information required to be provided to potential customers. 6. Making an Insurance Contract 6.1 Obligations of the Insured and Insurer The IA 2015 reformed UK insurance contract law in relation to misrepresentation and non-disclosure in commercial contracts. It applies to all (re)insurance contracts entered into wholly or mainly for the purpos- es of trade, business or profession that are entered into or varied after 12 August 2016. Duty of Fair Presentation The IA 2015 places the insured’s common law duty of full and frank disclosure on a statutory footing, impos- ing a duty on insureds to make disclosures in a man- ner that would be reasonably clear and accessible to a prudent insurer. The “accessibility” requirement is intended to prevent “data dumping” – ie, disclosing a mass of data without highlighting material considera- tions. Representations of fact by insureds must be “sub- stantially correct”, and representations of expecta- tions or belief must be made in good faith. An insured must make a “reasonable search” of the information
available to them, including information held by their agents or others who are intended to be covered by the insurance. An insured will need to disclose every material circum- stance they know or ought reasonably to know, or suf- ficient information to put a prudent insurer on notice that the insurer needs to make further enquiries for the purposes of revealing the material circumstances. A “material circumstance” for these purposes is any- thing that would, or is reasonably likely to, influence the judgment of a prudent insurer in determining whether to take the risk and, if so, on what terms. 6.2 Failure to Comply With Obligations of an Insurance Contract In the case of commercial contracts, where the breach of the duty of fair presentation by the insured was deliberate or reckless, the insurer can avoid the con- tract, keep the premium and refuse to pay claims. Where the breach was not deliberate or reckless, the remedy depends on what the insurer would have done if a fair presentation had been made. If the insurer would not have entered the contract at all, it can return the premium, avoid the contract and refuse to pay claims. If the insurer would have entered the contract but on different terms, the contract is treated as if the different terms had been agreed. If the insurer would have charged a higher premium, the insurer can pro- portionately reduce the amount it pays on a claim. In relation to consumer contracts, CIDRA 2012 requires the insurer’s remedies to be proportionate to the failings of the insured. 6.3 Intermediary Involvement in an Insurance Contract An insurance intermediary may act on behalf of the insurer or the insured. Where an insurance broker is acting on behalf of the insured, its duty is to exercise reasonable care and skill in the fulfilment of its instruc- tions and the performance of its obligations. An insur- ance broker is also under a duty to carefully ascertain its client’s insurance needs and to use reasonable care and skill to obtain insurance that meets those needs, together with carefully reviewing the terms of any quotations or indications given to its clients. An
514 CHAMBERS.COM
Powered by FlippingBook