Late Payment Damages: Understanding UK Insurance Act 2015

1. Damages for Late Payment of Claims in England • AIDA Reinsurance Working Party, Paris - 2 December 2015 • Simon Cooper, Partner

2. Background • The Insurance Act 2015 • The legal fiction of Insurance • The Enterprise Bill 2015

3. Enterprise Bill • Implied term in all ‘insurance contracts’ that claims must be paid ‘within a reasonable time’ • Remedy for breach will be the usual remedies for breach of contract, including damages • The right to claim interest for late payment will remain • These new provisions will apply to all contracts entered into after this Part of the Bill comes into force

4. A Reasonable Time? • Includes time to investigate and assess claim • Depends on all the circumstances including: • Type of insurance • Size and complexity of the claim • Compliance with regulatory rules and guidelines • Factors outside the insurer’s control

5. Disputing a Claim • If insurer shows that there were reasonable grounds for disputing claim (either as to cover or amount): • Failure to pay while dispute is continuing will not be unreasonable; but • Conduct of insurer in handling claim may be a relevant factor in deciding if there has been a breach

6. Contracting Out • No contracting out of the implied term in consumer contracts • No contracting out of implied term in respect of ‘deliberate or reckless’ breaches in commercial contracts • Contracting out otherwise permitted in commercial contracts subject to ‘transparency provisions’ of Insurance Act 2015

7. Potential Amendments • Limitation issues • Privilege issues

8. Some Potential Claims Issues • Claims Control Clauses • Subscription markets • Layering

9. Reinsurance Issues • Coverage in respect of damages awarded against reinsured for late payment? • Principles and legislation • Contractual coverage

10. Application to Reinsurance Claims • Scope of Insurance Act 2015 • The meaning of ‘Insurance Contract’ • Loss and Damages

11. simon.cooper@incelaw.com