UK Law and Practice Contributed by: Clare Swirski, E. Drew Dutton, Hugo Laing and Rosamund Wood, Debevoise & Plimpton LLP
Where the insured can demonstrate that a failure to comply with a contractual term, including a warran- ty, could not have increased the risk of the loss that occurred, insurers will no longer be able to rely on the breach to exclude, limit or discharge their liability. A breach of warranty will discharge the insurer from liability for loss occurring after the breach but not from liability for loss occurring before the breach or after the The IA 2015 provides that breaches of warranty that are irrelevant to the loss that occurs will no longer discharge insurers from liability (see 8.2 Warranties ). In consumer contracts, any attempt to contract out of any part of the IA 2015 will be of no effect. In com- mercial contracts, an insurer seeking to contract out of the provisions of the IA 2015 must take sufficient steps to bring the relevant term to the insured’s atten- tion and ensure the term is clear and unambiguous as to its effect. Fraudulent Claims The IA 2015 enables insurers to treat the insurance contract as terminated from the date of the fraudulent act. The previous common law position of insurers not being liable for fraudulent claims and being able to recover payments made to the insured in respect of a fraudulent claim remains unchanged. breach has been remedied. 8.3 Conditions Precedent Contracting Out of the IA 2015 9. Insurance Disputes 9.1 Insurance Disputes Over Coverage Coverage Disputes It is common for an insurance contract to specify a mechanism for dealing with disputes prior to resorting to litigation or arbitration. This may range from an ini- tial attempt to resolve the dispute through nominated senior executives or managers to other dispute reso- lution mechanisms, such as an independent expert determination or mediation. It is common for commer- cial insurance contracts and reinsurance contracts to contain an arbitration clause providing for disputes to be settled through arbitration rather than the courts.
Consumer contracts must contain certain provisions required by law or regulation to protect consumers. Whilst consumer contracts are sometimes litigated, insurers must provide consumers with details of com- plaints procedures and their right to refer disputes to the financial ombudsman. They are also under a regulatory duty to treat customers fairly. Disputes will therefore often be settled through internal pro- cedures or an ombudsman ruling rather than through the courts. Limitation Period for Insurance Claims There is no specific statutory limitation period for making a claim under an insurance or reinsurance contract. Insurance contracts are subject to the nor- mal limitation period under the Limitation Act 1980 for causes of action founded on breach of contract (six years from the date on which the cause of action accrues). As well as the statutory limitation period, (re)insurance contracts typically include a notification clause requir- ing the insured to give the insurer notice of claims or losses, or of circumstances giving rise to a claim or loss, in a particular manner (usually in writing) and within a particular period (for example, “as soon as reasonably practicable”). An insured can lose the right to an indemnity for failure to comply with a notifica- tion clause where compliance is a condition precedent to bringing the claim. “Claims made” policies provide cover for claims made within the policy period – usu- ally a year. Enforcement of Insurance Contracts by Third Parties The Contracts (Rights of Third Parties) Act 1999 allows for third-party enforcement in certain circumstances. For example, a third party may be able to enforce a contractual term in an insurance contract if: • they are specifically identified in the contract as someone who has rights under the insurance con- tract; or • the insurance contract purports to confer a benefit on them. In practice, contracts of insurance usually exclude the Contracts (Rights of Third Parties) Act 1999.
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