The Insurance Act 2015 (IA2015) comes into force on 12 August 2016. We're pleased to present a series of blogs each day this week, written by Joanne Staphnill from Triton Global, an international firm of solicitors specialising in the defence of insurance claims.
Each blog covers a different topic relating to the Act, debating the potential implications of the new regulation. Today we start with the duty of 'utmost good faith'...
What's in store?
The insured’s duty of ‘utmost good faith’ at the placing stage, a core principle of insurance law since the Marine Insurance Act 1906, no longer exists. The duty is now of “fair presentation”.
The insured still has a duty to disclose everything material that the insured knows or ought to know. Or “failing that”, enough to put the insurer on notice that it needs to make further enquiries. The “failing that” fall-back may well cause problems for insureds, their brokers and insurers in due course.
What does it mean for underwriters?
Busy underwriters may find their burden increased, as they will no longer be able to assume that the proposal information provided is definitely complete. Underwriters will need to be alert to anything that might indicate that further investigation is required, and be ready to pro-actively seek additional information. Underwriters who fail to do so may not be able to succeed with non-disclosure coverage arguments later on.
And for brokers...
Brokers might find themselves in a particularly difficult position. Cases like Standard Oak hold brokers to a high standard to ensure that the insurance “clearly” meets the insured’s needs. If the broker only provides enough information to put the insurer on notice, is the broker fulfilling its duty to the insured? On the other hand, the broker also needs to get the best premium quotations, which might be better achieved by giving the insurer ‘just enough’ information.
What's the answer?
The right answer might well be a matter of judgment in each situation, and clear advice to and discussion with, the insured will be key to making the right call.
The lesser standard of ‘enough to put the insurer on notice’ could be a grey area. It could leave insureds with uncertainty over whether a fair presentation has been achieved and potentially vulnerable to coverage disputes down the line.
Keep an eye out for our next post tomorrow: 'Countdown to Insurance Act: Is it material?'
About the author
|Joanne is a Solicitor and a Partner in the London office of Triton Global. 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).|