Enterprise Bill under fire: “sympathy” for insurers
Clause 20 of the Enterprise Bill 2015-16 currently before Parliament amends the incoming Insurance Act 2015 and, if enacted, will make it a term of insurance contracts that insurers will pay valid claims within a reasonable time. Unreasonable late payment would make insurers liable in damages. Whilst a number of industry bodies welcome the proposed change, it has caused particular concerns within sections of the London Market.
Mactavish, the Lloyd's Market Association (LMA), International Underwriting Association (IUA), Lloyd’s and Airmic wrote to Business Minister Baroness Neville-Rolfe expressing support for the Enterprise Bill subject to certain recommended amendments (as drafted by Colin Edelman QC and Richard Harrison of Devereux Chambers). The proposed amendments:
- Put a time limit of one year on claims by policyholder for damages for late payment of claims, time running from the date on which the insurer made the payment (or final payment where applicable).
- Provide that insurers would not be obliged to disclose privileged legal advice received in the defence of the claim.
The proposed amendments were tabled and debated in the House of Lords on 25 November 2015. The Government rejected the amendment on privilege (which was subsequently withdrawn) but agreed to consider the amendment on limitation.
It remains to be seen whether the proposed limitation of the period within which claims for late payment of claims can be brought will be enacted. If it is, this should go some way to alleviating concerns about the uncertainty in setting reserves that potential claims for late payment could introduce and assist insurers in assessing when they can close off the books for underlying insurance claims.
The basic change to the law in the Bill, introducing damages for late payment of insurance claims, remains. Given the consensus expressed by the industry bodies behind the amendments for supporting this change, the tabling of further amendments on behalf of the insurance industry now looks unlikely. Liability for late payment of claims seems therefore set to become law when the Enterprise Bill is enacted in 2016, bringing English law more closely in line with most other major jurisdictions.