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Wednesday 22 August 2012

UK Law Reform

The Law Commission and the Scottish Law Commission are conducting a joint review of insurance contract law. The third consultation on the insured’s duty of disclosure and law of warranties was published on 26 June 2012.

Under current law, a business policyholder has a duty to disclose every material fact known about the risk to be insured. Failure to do so may lead the insurer to refuse claims.  In some cases, not every material fact is known.  Information may not be deliberately withheld.  The proposal is that insurers ask the relevant questions to help ensure that every material fact is disclosed. Fairer consequences of breaches where the policyholder was not deliberately misleading are also being proposed.

An insurance warranty is an important term.  Unless the insured exactly complies with the conditions of a policy, the insurer may refuse claims.  It makes no difference if the breach is trivial, not material to the risk or if the policyholder remedies the breach prior to the loss incurred.

For example if a policy requires stock to be stored 6 inches off the floor to minimise flood damage and the insured does not comply, the insurer may not pay a claim following a burglary.

Proposals include that the insurer’s liability is suspended only for the duration of the breach and were applicable be relevant to the particular risk only. This would be subject to freedom of contract for business insurance.

Get in touch, talk through your insurance needs, and make sure you and your business are covered by the right policies.

Tuesday 7 August 2012

7 Reasons Why Insurance Companies Don’t Pay Claims

I hope that you have never been in the position to have an insurance claim refused.  If you have, it was probably for one of the following reasons:
1)          The claim was outside the scope of the policy.
                Your policy will only cover the risk specified.  It is important to consider all your risks carefully.  Those you cannot manage or eliminate, you need to insure.
2)          You failed to comply with the terms of the policy.
                There will be certain conditions you will have to meet in order for an insurance company to underwrite your risk.  No company is going to insure a building that has open fires burning in the centre of a warehouse full of flammable stock.  An extreme example I know but it is important to know that your policy is not being invalidated by something you are doing now.
3)          Your policy does not include consequential loss.
                Make sure your policy covers all the risk of any incident.  Particularly consider your ability to continue trading after a major incident.  Your buildings and contents may be insured but how will you remain in business if you have no means of doing business anymore?
4)          You gave false statements when you applied for insurance.
                Your insurance company will only insure what is real.  Lie and the policy will be void.
5)          You failed to pay your premium on time.
                Sounds obvious but you are not insured unless you pay the insurance premium.  Yes, you may feel being a few days late does not matter but if you have not paid your premium you are simply not insured.
6)          You take too long to report the claim.
                Make the claim as soon as possible. 
7)          You failed to disclose all relevant facts.
                Over 11 per cent of corporate insurance buyers have had a claim challenged on non-disclosure grounds in the last two years. Insurance policies are one of only a few contracts in which uberrima fides “utmost good faith” applies.  It is important you inform your insurance broker of all relevant information.
I’ll help with any claims, ensure the paperwork is correct and with the insurance company in good time.