Enterprise Act 2016 receives Royal Assent: DAC Beachcroft reaction
Published On: 4 May 2016
The Enterprise Act 2016 has today (4 May 2016) received Royal Assent. Once in force a year from today, insurers will have to pay damages if they are late in paying out on claims.
Nick Young, partner at international law firm DAC Beachcroft, commented: "While the industry has been aware of these proposals for some time, insurers need to act now, if they have not done so already, to update their policies and procedures and ensure that they can rely on the protections available to them.
"Deciding what a reasonable time is for paying sums due is certainly going to be a flashpoint for disputes between parties," he warned, "although the Act and explanatory notes do give some details on what should be taken into account, such as the type of insurance, size and complexity of the claim and factors outside an insurer's control.
"Another area for insurers to check is whether their claims handling processes acknowledge the various limitation issues," he continued. "The Act provides a limitation period of one year from the date on which insurers have paid all sums due under the policy in which to bring a claim against them for damages for late payment. Where indemnity is refused, it would seem that time will only start to run once there has been any judgment against the insurer and that judgment has been paid.
"Insurers will also need to review their reinsurance arrangements for any exclusion clause or positive statement of cover in relation to a cedant's liability arising from a late payment to an insured," he added. "Other areas that may need reviewing or training on include reserving, the voluntary use of interim payments and settlements.
"Clear guidance is only going to be available once these provisions are interpreted by the courts," he concluded. "The best thing that insurers can do for now is to clarify their policy wordings and procedures, and ensure that targeted training is rolled out to all involved."
The key provisions will slot in as ss13A and 16A of the Insurance Act 2015.