Attached is our latest piece with Professor James Davey and Dr Katie Richards of Bristol University in which they test whether s.11 of the Insurance Act might be used to mitigate the effects of breaching a claims condition (spoiler: probably not but we wait to see that issue tested) and ask whether the move towards a proportionate statutory regime should be extended further.

“Unlike large parts of insurance contract law… claims conditions do not build upon the scaffolding of a statutory codification. The effect of the clauses is determined by their wording, properly interpreted. Despite the recent reform of insurance law, and a consistent level of litigation, very little has changed in this area. It is one of the last great areas of ‘common law’ insurance law not subject to the statutory reform (especially in respect of remedies of breach) that characterised much of the 2015 Act…

…The claims condition is in a liminal state. The ‘innominate term’ version provides too limited a remedy. Insurers, even when subject to demonstrable prejudice, might only receive a relatively small reduction in their liability by way of a counter-claim in damages. The condition precedent version provides an absolute defence, irrespective of the prejudice suffered. A fair outcome relies, in some cases, on insurers not enforcing their strict contractual rights. We can do better…The problem is that the law fails to provide a neutral rule as a starting point for negotiation.”

This piece shouldn’t be viewed (because it doesn’t) as advocating that all claims should be paid irrespective of a breach of a policy condition. Most policy conditions are essential control mechanisms for Insurers to mitigate their potential liabilities at or following first notification of loss, and that should remain the case. The problem is that the law fails to provide a neutral rule as a starting point for negotiation, and policy language can often be potluck in the market unless you happen to be a regulated professional or a global corporate with bespoke language. 

Watch out for further pieces next year which will consider the increasing need for certainty on the extent to which the Insurance Act permits any counterfactual evidence to be taken into account when calculating what premium would have been charged by the underwriter following a qualifying breach  (the hypothetical bargain: very topical right now) and, separately, we will consider the law on fraudulent claims that are withdrawn before an Insurer makes a decision and whether that should be encouraged as matter of policy (controversial, I know).

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I have included the relevant case reference and where possible the hyperlinks to some of key authorities referred to for the insurance geeks that want to dig a little deeper:

McAlpine v BAI [2000] EWCA Civ 40

https://www.bailii.org/ew/cases/EWCA/Civ/2000/40.html

Bankers Insurance v South [2003] EWHC 380 (QB)

https://www.bailii.org/ew/cases/EWHC/QB/2003/380.html

Nulty v Milton Keynes BC [2011] EWHC 2847 (TCC).

https://www.bailii.org/ew/cases/EWCA/Civ/2013/15.html

Komives v Hick Lane Bedding Ltd [2021] EWHC 3139 (QBD)

https://www.bailii.org/ew/cases/EWHC/QB/2021/3139.html

Arch Insurance (UK) PLC v McCullough [2021] EWHC 2798 (Comm)

Cuckow v AXA Insurance Plc [2023] EWHC 701 (KB).

https://www.bailii.org/ew/cases/EWHC/KB/2023/701.html

Last Bus Ltd v Dawsongroup Bus and Coach Ltd [2023] EWCA Civ 1297

https://www.bailii.org/ew/cases/EWCA/Civ/2023/1297.html

FOS: DRN1902870

https://www.financial-ombudsman.org.uk/decision/DRN-1902870.pdf

FOS: DRN1330932

https://www.financial-ombudsman.org.uk/decision/DRN1330932.pdf

This post is intended to provide guidance of a practical nature but does not contain legal advice or advice as to what action you should or should not take specific to your insurance needs or those of your business, or with regard to any particular situation.