As we have reported previously, there are a number of action groups who are actively pursuing group claims against insurers. The groups argue that the insurers in question have unlawfully refused group members’ claims under their business interruption (“BI”) insurance policies.
News emerged earlier this week that the action group that is proceeding against the insurer Hiscox is looking to recover claims monies that they say they are due under the BI policies in question (presumably plus interest on the outstanding claims monies), but also additional compensation in terms of damages that they say they have suffered as a result of the late payment of the insurance claim.
The background to this is a little heralded provision of the Insurance Act 2015, Section 13A. This was introduced into the Insurance Act by the Enterprise Act 2016 and came into force on 4 May 2017.
Section 13A requires insurers to pay insurance claims within a reasonable time and, if they do not do so, they must potentially pay contractual damages to the insured.
The section provides some clarity around the scope of claims for contractual damages against insurers:
- Every contract of insurance contains an implied term that the insurer will pay a claim within the reasonable time (a reasonable time will always include time for the insurer to investigate and assess the claim);
- What is a “reasonable time” depends on the circumstances, including the type of insurance, the size and complexity of the claim and any factors outside the insurer’s control; and
- An insurer has a defence if it has reasonable grounds for not paying the claim. However, the manner in which the claim is handled may be a relevant fact in deciding whether the term was breached.
We understand that this may well be the first time that there has been a claim against an insurer under Section 13A of the Insurance Act 2015 and we await further developments in this and other groups actions against insurers. In particular, we wait to see what additional losses the claimants say that they have suffered by reason of the late payment of the claims and how they will evidence legal issues such as causation and remoteness of damages.