Enterprise Bill could stop insurers paying late and transform claims landscape, says Rosling King solicitor

The Government’s proposals to penalise insurers who do not pay claims promptly – and have no good reason for delay – could result in the transformation of the claims landscape, according to a solicitor at Rosling King.

According to Georgina Squire, head of dispute resolution at Rosling King, a new proposal in the Enterprise Bill published by the Government could introduce a right to damages for the late payment of claims.

The proposal is to include in every insurance policy a requirement on the insurer to pay sums due within a ‘reasonable time”. The Bill tries to assist by listing matters which should be taken into account when assessing this time period.

These include issues such as allowing time to investigate a claim and allowing for contracting out of the default rules for non-consumer insurance contracts, provided that the insurer satisfies the transparency requirements set out in the Insurance Act 2015 (unless the breach of the term is deliberate or reckless, in which case any ‘contracting out’ term will have no effect).

“One of the major issues for insured entities in the UK is that, unlike most other jurisdictions, there is no legal basis on which a business can recover its loss or damages from its insurer caused by delay in payment of a claim,” said Squire.

“They may be able to claim interest for part of the period of delay, at best,” she added. At current interest rates, that often does not provide enough recompense for an insured whose business has been adversely affected by the claim.

“This often happens in the context of property and business interruption claims. An example would be a fire or flood in a business premises, not only causing damage to stock and machinery, but also causing the business to close for a while.

“Whilst large businesses may be able to survive the delay, smaller businesses can find it stifling or worse, it can be the catalyst for putting them out of business.  A right to damages for the late payment of claims was initially going to be included in the Insurance Act 2015, but due to disagreement as to how it would operate, it was dropped. “

“On the assumption the Enterprise Bill becomes law and this provision remains in it, it is assumed that the Insurance Act 2015 will have to be amended to include it after all, ” said Squire.

Mark Dugdale