What's in store?
The old law was that if an insurer could prove a material misrepresentation/non-disclosure, they could ‘avoid’ the whole policy – i.e. treat it as if it had never existed.
Insurers could seek to recover indemnities already paid out under the policy, as well as refuse to pay future claims, but would also have to return the premium. IA2015 makes huge changes to this important area of insurance law and practice.
So what's changed?
Under IA2015, if the misrepresentation/non-disclosure is deliberate or reckless, the insurer can still avoid and tender a return of premium. In this instance, the burden of proof is on insurers.
If the insurer would still have agreed to insure, but on different terms, those terms apply. That can include exclusions. If the insurer can show that, had it known the full picture, it would have insisted on an exclusion, and if that exclusion would apply to the particular loss being claimed, then the entire claim can be declined (and any other paid claims to which that exclusion would apply).
If the insurer would still have agreed to insure, but would have charged higher premium, the claim is reduced proportionally. In other words, if the insurer would have charged an extra 25% premium, the claim indemnity is reduced by 25%.
What does it mean for your insurer?
For insurers and those who act for them on investigations and on coverage (such as loss adjusters and coverage counsel), this will necessitate more detailed investigations about exactly what difference, if any, the material information would have made to i) the willingness to insure at all, and ii) on what terms and iii) at what premium.
In contentious coverage cases, insurers could also be placed in a quandary. The evidence needed to prove that different terms or premiums would have applied if the full picture had been know might be very commercially sensitive for the insurer. Insurers might have to decide whether to take the immediate financial loss of conceding a coverage dispute, or to disclose their underwriting criteria to win the coverage dispute while risking a commercial detriment from having that information brought into the public domain at trial.
Want to know more?
If you want to know more about how the IA2015 will affect you Joanne is happy to give you the benefit of her expertise. You can get in contact:
Call: 0333 010 0000
If you missed our blogs previous blogs about IA2015, you can find them here:
- Monday: Duty of 'Utmost Good Faith'
- Tuesday: 'Material' Information
- Wednesday: ‘Basis of Contract’
- Thursday: Warranties
- Today: Misrepresentation/Non-Disclosure
About the author
|Joanne is a Solicitor and a Partner in the London office of Triton Global, an international firm of solicitors specialising in the defence of insurance claims. She practices in insurance law, including advising on coverage and drafting insurance policies. She also specialises in the defence of professional negligence claims against a range of professionals, but particularly solicitors, insurance brokers and clinicians. She enjoys singing with the Lloyd’s Choir and motorcycling (yes really).”|