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Friday, May 5, 2017

Enterprise Act 2016 ~ Insurers will have to pay for delay (in UK)

Enactments get refined with passage of time.  A Govt. Press release states that the UK’s 5.4 million businesses are set to benefit as the Enterprise Bill received Royal Assent  (4 May 2016) to become  the Enterprise Act.The package of measures in the Act  are aimed at helping  the government deliver on many of its commitments, from cutting red tape and tackling late payment to boosting the quality and quantity of apprenticeships.

The Enterprise Bill 2015 received Royal Assent on 4 May 2016. The provisions relevant to insurers are those at sections 28 -30, which come into force from 4 May 2017 and amend various sections of the Insurance Act 2015 (the rest of which generally came into force on 12 August 2016).

Enterprise Act 2016 :An Act to make provision relating to the promotion of enterprise and economic growth; provision about Sunday working; and provision restricting exit payments in relation to public sector employment.BE IT ENACTED by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same .. .. ..

Under a new section 13A of the Insurance Act 2015, it will be an implied term of every contract of insurance that the insurer must pay any sums due in respect of a valid claim within a reasonable time, and will liable to the insured in damages in the event of breach.This key provision will end the position under Sprung v Royal Insurance [1997], which held that an insurer could not be liable in damages, even for deliberate late payment of claims and an insured’s redress for late payment was limited to the additional payment of interest. The change brings English insurance law closer into line with the position in many other major jurisdictions and will be welcomed by insured companies.
Bharat Insurance Building, Chennai

Part 5 of the Act deals with late payment of insurance claims
·         Insurance contracts: implied term about payment of claims
·         Contracting out of the implied term about payment of claims
·         Additional time limit for actions for damages for late payment of insurance claims

Before that the Act  deals with a range of Government commitments which are intended to support the growth of enterprise in the United Kingdom.

 Some  features of the Act  :
 • establishes a Small Business Commissioner, to enable small businesses to resolve disputes with larger businesses and avoid future issues; • expands the deregulation target to include regulators;[ The Act specifies what Small business  as meaning  a relevant undertaking which— The Small Business Commissioner 2 (a) has a headcount of staff of less than 50, (b) if the business threshold condition applies to the relevant undertaking, meets that condition, and (c) is not a public authority.] • requires regulators subject to the duty to have regard to the Regulators' Code and/or the Growth Duty to report on the effect these duties have had on the way they exercise the functions to which these duties apply; • extends the Primary Authority scheme to make it easier for more businesses to join; • protects the term apprenticeship in law, with a view to ensuring that apprentices have access to high quality training; • gives powers to set targets for apprentice numbers in the public sector; • requires insurers to pay insurance claims within a reasonable time; • reforms the business rates appeals system and reduces the burdens for businesses when dealing with local authorities in relation to business rates; • extends the rights of shop workers working on Sundays; .. .. ..

What does the inclusion of new S.13A in the Act mean for Insurers :
•        It will be an implied term in all “insurance contracts” that claims must be paid “within a reasonable time”. “Insurance contracts” in this context will include reinsurance contracts.
•        The remedies for breach of this implied term will be the usual remedies for breach of contract, including damages. That means, of course, that the usual tests of causation will have to be satisfied and the insured will have to prove on the balance of probabilities that any loss for which it claims damages was caused by the insurer’s breach of the implied term.
•        The right to claim interest for late payment will remain and any damages will be in addition to that interest and in addition to the amount payable under the insurance in respect of the original claim.
•        The limitation period in which an insured can bring a claim for damages for late payment will be one year from the date of the last payment by the insurer in respect of the relevant loss.

It is an implied term of every contract of insurance that if the insured makes a claim under the contract, the insurer must pay any sums due in respect of the claim within a reasonable time.   The new provisions specify that –
(2)A reasonable time includes a reasonable time to investigate and assess the claim.
(3)What is reasonable will depend on all the relevant circumstances, but the following are examples of things which may need to be taken into account—
(a)the type of insurance,
(b)the size and complexity of the claim,
(c)compliance with any relevant statutory or regulatory rules or guidance,
(d)factors outside the insurer’s control.
(4)If the insurer shows that there were reasonable grounds for disputing the claim (whether as to the amount of any sum payable, or as to whether anything at all is payable)—
(a)the insurer does not breach the term implied by subsection (1) merely by failing to pay the claim (or the affected part of it) while the dispute is continuing, but
(b)the conduct of the insurer in handling the claim may be a relevant factor in deciding whether that term was breached and, if so, when.
(5)Remedies (for example, damages) available for breach of the term implied by subsection (1) are in addition to and distinct from—
(a)any right to enforce payment of the sums due, and
(b)any right to interest on those sums (whether under the contract, under another enactment, at the court’s discretion or otherwise).”

Interesting !

With regards – S. Sampathkumar
5.5.2017
Extracted from many sources on net including www.gov.uk& legislation.gov.uk.



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