The Enterprise Act comes in to force on the 4th May 2017, bringing with it new legislation for the insurance industry relating to the handling of claims. The Act provides that insurers and their representatives must perform so that claims are dealt with in a reasonable time frame. If this goal is not achieved, then the act will enable the insured to claim for subsequent losses incurred.
So, the Act benefits policyholders?
Many people in the industry expect that the main beneficiaries of the new rules will be small to medium sized businesses – businesses with up to 250 employees operating in England and Wales (The Act does not extend to Scotland or Northern Ireland).
The act places the onus on insurers to settle claims promptly, i.e. in a “Reasonable Time”. However, this does not stop the insurer from investigating and assessing the claim.
“Reasonable Time” is not defined although The Act provides that a “reasonable time” includes time to investigate and assess the claim.
So, what are the remedies?
Under the Act, it will be an implied term of every contract of insurance that if the insured makes a claim under the policy, the insurer must pay any sums due within a reasonable time. Breach of this implied term may give rise to a claim against the insurer for damages.
Claimants have up to 1 year to submit a compensation claim after settlement is received if they discover that the delay has had additional cost implications. After the expiry of that one-year period, any claim for damages against the insurer will be time-barred.
However as this is a new piece of legislation there are no legal precedents or case studies that illustrate how the new act will work in practice. It could be said that the legislation is dealing with a problem that has not been significant to Property Managers or landlords as some claims always take time to resolve, such as subsidence claims. Also, there is no great benefit to insurers in delaying settlement as a damaged building is likely to be at greater risk of further damage than a weatherproof structure.
You may recall that The Insurance Act allowed insurers to ‘contract out’ of many of the provisions. This again appears as an option with the new rules.
The right to damages for late payment of claims will be an implied term in all insurance policies therefore does not need to be stated in policy documents. Parties can agree to contract out, although this is most likely to be seen where the insurer imposes it and policyholders can choose to accept it or purchase cover elsewhere.
Look to your Broker for more help
Your Broker should bring you the benefits of their relationships with and knowledge of the insurers covering the property world, including the ways in which they will be dealing with the new requirements. Remember that the Broker usually acts as your agent in sourcing and arranging the insurance and in dealing with you claims.
In some cases, brokers will act under a delegated authority to settle claims on behalf of insurers – acting as the agent of the insurer as well as for the customer. In these cases much of the responsibly for meeting the new rules lies with the Broker.
Kevin Donegan is Property Account Director at Clear Insurance Management Ltd