Posted by John North, Partner
May the Fourth (of the Enterprise Act) be with you
Provisions under the Enterprise Act 2016 came into force on 4 May 2017, implementing stricter guidelines on insurers’ handling of claims. This begins to align our law surrounding insurance with that of the USA. In light of these new provisions, let’s look at how claims may be affected under policies taken out (or renewed) after this date.
In short, the new provisions include:
- An implied term in all new and renewed insurance contracts that insurers “must pay any sums due… within a reasonable time”. If this term is breached by an insurer, the insured party may be able to claim damages in addition to the claim sum.
- The right to claim interest for the late payment of a claim is still in force, and can be claimed in addition to the amount due under the original claim and any damages
- A claimant has one year “from the date on which the insurer has paid all the sums” due under the insurance contract.
These new provisions affect all insurance contracts entered into, or reissued, on or after 4 May 2017.
Sounds promising, right?
But what is a reasonable time? To a typical consumer, one might expect a timeline of one month in which the claim would at least be settled in principle. To a professional working in the legal industry, however, their expectation could be anywhere up to six months, depending on the facts. And who’s to say which is right?
It is also important to note that this requirement does not apply so strictly if an insurer can show a “reasonable dispute” is being resolved. Again, it is not defined what this could include, although it would be sensible to equate it to having “real prospects of successfully defending the claim”, but one can already see its potentially wide scope.
If one wishes to claim damages as a result of a late payment, they must be able to prove and quantify on the balance of probabilities that they have suffered a loss as a result of the delay.
One year doesn’t sound very long but it is longer than expected if one considers the date from which this period may run. It will likely come up for debate as to what constitutes a payment of “all the sums” due under the insurance contract and, consequently, when the limitation period begins to run.
But who decides what sum is actually due under the contract?
Insurers will understandably claim that they paid all the sums due at the earliest point possible (thereby squeezing any remaining limitation), whereas the insured may argue that the claim has still not been settled in full, or that additional payments were made later, and so the one year limitation has not even begun.
Despite these minor flaws, the general impact of these provisions is advantageous to the average consumer.
Insurance companies will be compelled to converse and reply promptly throughout the claim-handling procedure, as a failure to do so may still result in the Court finding that they have caused an “unreasonable delay”. If they do not comply with this Act, you may be due damages in addition to your original claim sum.
If you have an insurance contract dated or reissued after 4 May 2017 and you unfortunately have to make a claim, keep a record of all correspondence. In addition, you must record and evidence any losses you suffer as a result of the delayed payment. A court will need to be persuaded of these on the balance of probabilities.
If you would like further advice on your legal position regarding a potential claim of any sort, please contact the Dispute Resolution team
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