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Published 23 June 2016
A reminder that the Insurance Act comes into force on 12 August 2016. Under the Act, the duty of disclosure remains for non-consumer policyholders but is reframed as a broader "duty of fair presentation" of the risk. The duty is satisfied either if all material circumstances are disclosed or if sufficient information is provided to put a prudent underwriter on notice to make further enquiries. Remedies are proportionate.
The Act abolishes "basis of the contract" clauses for business insurance and parties cannot contract out of this. An insurer’s liability is also merely suspended, rather than discharged, in the event of breach of warranty.
The Act also includes provision that non-compliance with a warranty or other term (such as a condition precedent), designed to reduce particular types of loss occurring at a particular time or place, will not debar a claim if the policyholder can show that the non-compliance could not have increased the risk of the loss in the circumstances in which it occurred.
Fraud is clarified as forfeiting the whole claim, with insurers being able to terminate the policy with effect from the date of the fraudulent act, but previous valid claims are unaffected.
The Enterprise Act 2016 received Royal Assent on 4 May 2016. With effect from 4 May 2017, the provisions of the Act introduce into every contract of insurance an implied term requiring the insurer to pay sums due within a reasonable time. Failure to do so entitles the insured to remedies including damages. For further information, please read our Alert on the subject.
After a wait of many years, the Third Parties (Rights against Insurers) Act 2010 will finally come into force on 1 August 2016. The 2010 Act will allow a third party to issue proceedings directly against a liability insurer where the insured is insolvent to resolve all issues (including the insured's liability) without first obtaining a judgment against the insured. It also gives claimants greater rights to find out information about the insurance policy before deciding whether to issue a claim.
The Law Commission has conducting a short consultation on a draft Insurable Interest Bill. The purpose of the consultation is not to discuss the actual form of words that appear in the draft but to understand whether the wording meets the policy objectives set out in the March 2015 issue paper. The consultation closed on Friday 20 May.
Inherent Defects Insurance (also known as Building Defects Insurance or Latent Defects) has been available for many years. However, it typically focuses on the structure of a new building and will generally exclude non-structural elements such as mechanical and electrical services. As M&E installations have become more sophisticated and expensive, the demand for Machinery Inherent Defects Insurance (MIDI) is growing. This specialist insurance will provide cover, usually for 10-12 years after practical completion, for damage caused by an inherent defect in the machinery or plant that existed prior to practical completion.
The insurance is taken out by the developer prior to the start of the works and can be transferred to subsequent owners. Cover will be subject to technical audits being carried out during construction.
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