Insurers Liable for Late Payment of Claims
From today, 4th May 2017, the Enterprise Act 2016 (“the Act”) comes into force in the UK. All insurance policies that are issued, or renewed, from today and that are subject to English law and practice will be subject to the new law.
The Act amends the Insurance Act 2015 (which itself amended certain provisions of the Marine Insurance Act 1906). It has the effect of making insurers potentially liable for damages if they unreasonably delay payment of claims. This is a change to the law which up until now was that insurers could only be liable for interest on late payment but could not normally be liable for consequential losses arising from delay.
If there is an unreasonable delay in payment by insurers, an assured may now be able to recover from insurers his additional losses arising from the delay (in addition to the claim itself). This is provided that the assured can show his additional losses are not too remote from the delay caused by the insurers.
Under the Act, an assured is given one year (starting from when the claim is paid) to bring his action against insurers for damages for late payment.
What constitutes an unreasonable delay will depend on the particular circumstances of the claim. In particular, the size and complexity of the claim will be important. It is also important to note that the Act does not deprive insurers from taking the necessary time to fully investigate and assess the claim. Insurers are unlikely to be penalised if there was a delay whilst the claim was disputed, provided there was a reasonable basis for the dispute to have arisen, even if the claim is ultimately paid.
As with some other provisions of English insurance law, insurers may in principle contract out of the late payment provisions in the Act at the time that the insurance is placed, although this would still not excuse an insurer who delays payment deliberately or recklessly.
This message is being circulated to our clients and contacts in the transport insurance industry world wide. Please contact us should you require any assistance with this or any other transport claim matters.
Matthew Robinson
May 2017
