The Insurance Act 2015

Relevant changes in the English insurance contract law have led to a reform of the long existing Marine Insurance Act 1906, resulting in the Insurance Act 2015 (“the Act”).

The Act received Royal Assent on 12 February 2015 and came into force on 12 August this year.

The Act applies to all policies subject to the laws of England and Wales, Scotland and Northern Ireland which incept, renewed or varied after August 2016.

The Act responds to developments in the present way of conducting business within the insurance market. Not for nothing the Act has been described as the greatest change to English insurance contract law in more than 100 years.

Charterama is always committed to combining the best of the past without losing focus on the challenges of the future. We welcomed the new development in the legislation and implemented the amendments without exclusions.

The Act creates duties that may significantly impact the insurance cover in case of non-compliance with the new norm. Accordingly, Charterama encourages all insureds to get acquainted with the Act and with the obligations imposed.

Disclosure of information

Within the reforms attention should be paid to the way information is disclosed. This boils down to an evaluation of what the Act has called a “duty of fair presentation” of the risk. A breach of the “duty of fair presentation” will give the insurer the possibility to apply any of the proportionate remedies introduced by the Act. Depending whether the breach is done deliberate / reckless or not a range of remedies may come into play. In a worst-case scenario, a breach can give the insurer the possibility to avoid the contract, refuse all claims and keep the premium.

Warranties

The approach in relation to warranties takes a new turn under the Act. In case of breach of a warranty there is no longer an automatic right for the insurer to avoid the policy completely. Instead, the breach can now be remedied and the duration /connection of the breach with the loss will be tested before the insurer can suspend liability under the contract.

Fraudulent claims

The price for making fraudulent claims under the Act is no right to compensation for the loss or reimbursement to the insurer in case any sum has been paid.  The insurer may also decide to terminate the contract as from the date of the fraudulent act with no need to return premiums paid. The Act, however, does not abolish the right and obligation of the parties regarding any incident occurred before the fraudulent event. In other words, existing claims remain payable.

Clarifications

To finalize the Act clarifies the legal concepts of “good faith” and “contracting out”. The Act reaffirms that the marine insurance contracts are contracts of utmost good faith thus any law permitting to avoid the policy because good faith was not observed by the other party is not applicable. Further, the principle of law by which parties are free to agree on terms they have mutually given consent is taken into consideration in the Act.  The Act provides that the negotiation of any “disadvantageous term” for the insured will be only binding if certain transparency requirements are met by the insurer. In other words, the disadvantageous term must be brought to the attention of the insured and presented on a clear and unambiguous manner.

Charterama foresees that the new development in the law will keep us more active when exchanging information in the negotiation phase of the insurance contract. We welcome this as it will contribute to closing more clear agreements to the benefit of all of us.

Charterama is always open to assist in case of questions or doubts on how the new changes apply to our insureds. Please do not hesitate to contact us in case of any queries in this respect.