Introduction

With policyholders still feeling the impact of the cost of living crisis and with business insolvencies running at their highest since 1993 and, by all reliable accounts likely to exceed that later this year, most insurers (and their teams of counter-fraud investigators) will be carefully scrutinising any insurance claims submitted for the possibility of fraud.

Given this backdrop it is timely and helpful to remind brokers, and anxious policyholders, about some of the key issues involved in fraud and what needs to be considered in such cases.

It is also worthwhile highlighting that brokers should be wary and make proper enquiry of their policyholder clients in respect of the claim and what is being said and claimed, to ensure they provide the correct advice/warnings to their policyholder clients before submitting the claim onto the insurer.

In this piece published on 12th December, I ask why we don’t have a specific CPR Pre-Action Protocol for coverage disputes and whether it is time we had one.

We would like to thank all of our clients and contacts who gave such positive feedback to The Legal 500 that we have achieved our best directory entry ever: https://www.legal500.com/firms/4335-wynterhill-llp/7582-london-england/#section-112398.

Insurance disputes lawyers churn out a huge amount of comment on recent cases and other legal developments. The form and content of such pieces demonstrates considerable uniformity.  The mindsets of insurance litigators are more alike than any individual within that group might care to admit. In an effort to do something different, Wynterhill has commissioned Professor James Davey and Dr Katie Richards, leading insurance law academics from Bristol University, to produce a series of short thought pieces on insurance law in the UK, with Wynterhill’s contribution being limited to providing, if relevant, examples of our experiences in the contested claims arena. 

It was a real privilege to be asked by BILA and the Insurance Post to write a short thought piece which was published last week:

https://www.postonline.co.uk/claims/7953197/bilas-brooks-on-why-policyholders-good-insurers-bad-attitudes-dont-wash

As a coverage lawyer who only acts for policyholders when they find themself with a business critical or personally vital coverage issue, I hear the tribal drums all too often: they took my premium and now they don’t want to pay my claim. Those perceptions are harmful and untrue. They cloud the special function that insurance plays in society as a private instrument for transferring risk and often overshadow the many success stories that the industry has to offer.

Last week the Commercial Court provided helpful guidance on the interpretation of “condoning” and what professional indemnity insurers need to prove to establish that a partner or director of a law firm has condoned a dishonest or fraudulent act to allow them to decline insurance cover.

Background

Solicitors’ Professional Indemnity Insurance policies must comply with the Solicitors Regulation Authority’s Minimum Terms and Conditions of Professional Indemnity Insurance (the “minimum terms”).

Under those minimum terms, insurers can decline to cover a claim which arises from dishonesty or a fraudulent act/omission and which was either committed or condoned by all the LLP’s members or directors of the (legal) company.

The burden of proof is of course on the insurer.

Every few years something comes along which is predicted to have astonishing implications for D&O cover. Quite often insurers propose a new policy extension to deal with this issue. Buyers of D&O insurance are reassured – they now have a clause of the policy with a heading that mirrors the issue about which the directors to whom they answer have been badgering them.  Everyone’s a winner! Or are they? 

“The first days or weeks after a major event can be strategically critical to the insured’s business and to the outcome of an insurance claim… Insurers have the right to investigate policy coverage, but the manner of the investigation and an early reservation of rights can be the first sign that insurers have identified something that could limit coverage in part or in full…

Hardening insurance market conditions are reinforcing the trend that led to the creation of Wynterhill LLP. It is becoming increasingly tricky for panel firms to service the insurance industry and also to represent their policyholder clients who have a coverage problem. This isn’t because the rules governing conflicts of interest have changed, it is because perceptions and mindsets about actual or potential conflicts have become more rigid.

At the start of the month the International Underwriting Association (IUA) published its “Building
Safety Fund Cladding and Fire Safety Limited Exclusion and Aggregation Clause”. To save time let’s just refer to it as the “IUA Fire Safety Clause”.

The dangers of unsafe cladding and the associated issues facing the construction sector are well
known. There is a recognised need to encourage and enable the removal of unsafe cladding without further delay. It is a life and death issue. That makes it all the more frustrating that the IUA Fire Safety Clause appears so inadequate in a number of respects.

The CJC is conducting an important review of all Pre-Action Protocols and has asked for market participants to complete an on-line questionnaire by Friday 18th December 2020:

https://www.judiciary.uk/announcements/civil-justice-council-launches-review-of-pre-action-protocols

Attached is a list of all reported insurance cases of note so far in 2022 with hyperlinks. Away from the obvious BI related cases (important as they are), the Commercial Court has been busy dealing with a broad spectrum of wordings and issues thus far this year. From aggregation issues in a commercial combined policy; to rectification in a trade credit dispute; to determining an Enterprise Act claim following a successful marine cargo claim; to difficult co-insurance issues in a project insurance policy; to an exclusive jurisdiction clause in an excess layer policy; and the enforceability of a choice of law clause in a marine liability policy to name a few.

What happens if an appellate court ruling undermines the foundations of part of the lower court’s decision that was not appealed? It would seem from the decision of Mrs Justice Cockerill in Corbin & King v AXA that it might be necessary to revisit any conclusions drawn from the lower court ruling.

https://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWHC/Comm/2022/409.html&query=(corbin)

In light of the decision of the Divisional Court in the FCA Covid test case, policyholders with non-damage denial of access cover triggered by official action in the immediate environs of their premises may have given up hope of cover. They may need to think again.

Mr and Mrs D’s complaint against LV, and the Ombudsman’s finding for the policyholder (represented by Wynterhill LLP) is a stark reminder of the risk of alleging fraud against a policyholder where the factual basis of that policy defence is speculative:

https://www.financial-ombudsman.org.uk/files/315005/DRN-3015080.pdf

Anyone interested in insurance law, property damage claims, claims advocacy and dispute resolution generally should take time to read this final award in order to better understand how the Financial Ombudsman approaches such complaints.

Unquestionably it has been an action-packed year for insurance coverage lawyers from both sides of the market. There were at least 15 insurance cases of note throughout 2021 to read alongside the day job. We thought it would be useful to pull them all together in one place and we have attached a link to each reported case in the comments for those that want to dive into the detail.

The purpose of all Pre-Action Protocols generally is to try and assist the parties in resolving claims without the need for proceedings, which includes the parties exchanging sufficient information to understand each other’s case, to make informed decisions about how to proceed and to reduce the cost of claims.

The decision of HHJ Railton QC in Discovery Land Company LLC -v- Axis Specialty Europe SE [2021] whilst not unsurprising in its outcome following the Defendant’s application to amend it Defence to the claim, does raise broader questions regarding what is expected of the parties to an insurance coverage dispute prior to the commencement of litigation.

In August 2021 the Court of Appeal considered an aggregation dispute arising from clause 2.5 of the Solicitors Minimum Terms and Conditions (“MTC”) for professional indemnity insurance.

The judgment in Baines & Anor -v- Dixon Coles & Gill (A firm) & Ors [2021] EWCA Civ 1211 (“Baines”) has provided important guidance on when multiple claims can be aggregated to form one claim under the solicitor firm’s professional indemnity insurance policy. It significantly reduces the scope for aggregation and will be a cause for concern to insurers of primary layers in the solicitors’ professional indemnity insurance market. It will, however, be welcome news to insureds facing multiple claims and to their excess layer insurers.

On 16 July 2021 Judge Keyser QC handed down his reserved judgment on disclosure issues relating to a claim for punitive damages against Zurich, heard as part of a Costs and Case Management Conference (“CCMC”).

Some thoughts on Next Steps in the FCA Test Case

Shortly after 10.30am on Tuesday 15 September 2020, victory was announced. Law firms stormed the Web to be the first to describe the policyholder triumph in the FCA’s Test Case on business interruption cover. But then odd things began to happen. By the end of the day, shares in Hiscox, one of the vanquished Insurers, were valued 15% higher than earlier that morning. Over the next few days reports emerged of individual Insurers posting loss reserves on business pertaining to the case in the region of £100million. Hold on: hadn’t they been told to pick up the tab for an economic catastrophe in which no-one now really pays attention to figures below £10billion? Are we the victims of fake news? Let’s have a look.

The Court of Appeal has rejected the insurer’s appeal in the fire damage claim of Endurance Corporate Capital Ltd v Sartex Quilts & Textiles Ltd [2020] which concerned issues relating to the reinstatement basis of indemnity for property losses; whether there had to be an intention to reinstate; and the issue of betterment.

The need to get the Building Contract right is not a novel concept. Employers and Contractors alike are familiar with the challenge of getting to grips with pages of Special Conditions, operating as amendments to already lengthy Standard Forms. The “new normal” world introduces a new dimension to this challenge – that of understanding the additional economic risks caused by Covid-19.

https://youtalk-insurance.com/news/zurich/zurich-publishes-quarterly-claims-journal-spring-2019?utm_source=ConstantContact&utm_medium=Email&utm_campaign=Issue-580

Zurich’s large and complex loss team should be applauded for setting out in “blue and white” on page 14 of the claims journal their claims commitment which involves (amongst other things) a promise to:

– Provide “an initial view” on policy liability within 48 hours of first notification if “it is clear what caused the incident”;

– Hold a “conference call” with the policyholder and their broker within 5 days to agree a claims strategy;

– Inform the policyholder what further information is needed to confirm cover within 7 days of first notification; and

– Provide an “initial view about paying your claim” within 72 hours of receiving the information needed.

These are bold and market leading promises from the policyholder’s perspective and another example of Zurich’s market leading claims team’s culture of “trying to support policyholders” and raise the claims handling standard, great to see.

The purpose of writing this blog is to share with my network a few observations that might, I hope, lead to further improvements.

Those of us who deal with insurance tend to attach undue significance to individual words or short phrases. I have lost count of the number of articles I have seen, following some court decision, trumpeting something along the lines of “now we know what an ‘event’ is?” Usually a review of the judgment confirms that we already knew what an event was: the court having yet again reached for the dictionary and recited the relevant definition while lamenting that it has been asked to opine on the meaning of a word in the abstract and outside its contractual and factual context.

Cyber risk is real

Cyber breaches unfold within the hyper real time of our globally networked environment.

Your entire businesses can freeze in an instant, its revenue streams stopped dead.

Your customers, used to everything “on demand”, may walk away if you don’t fix things fast.

Your regulators will demand instant responses to leaks of confidential information.

Read More

Much of the discussion of the Insurance Act 2015 (“the Act”) might have been designed to induce complacency in policyholders, especially when it comes to navigating the infamously treacherous waters of pre-contractual disclosure.  No longer, some have argued, will policyholders be held hostage to “technical” breaches of those hard to fathom rules.

Read More

Here are some easy questions to ask about your insurance covers. The answers to them may give you the opportunity to ask for better cover at no additional cost. This is because all you will be asking for is that the policy language clearly reflects what, in all fairness, ought to be the intent of the cover. There should be no additional charge for a policy wording that is fit for purpose.

Read More

The Insurance Act 2015 is supposed to make it more difficult for insurers to avoid policies. This is particularly good news for those insureds whose policies also say that insurers will not avoid the policy unless the insured has been guilty of some form of misconduct in the disclosure process. Those lucky insureds will consider themselves doubly protected. However, that double protection may not work if the drafting of the policy has not recognised the innovations of “the duty of fair presentation”.Read More

The Supreme Court of New South Wales has become the latest judicial body forced to try not to appear baffled when confronted with the word “related” in an aggregation clause (Bank of Queensland v AIG Australia Ltd [2018] NSWSC 1689).

The Insurance Act 2015 (“the Act”) makes a serious effort to mitigate the risk of policies being avoided by way of “technical” breaches of the insured’s obligation to give pre-contractual disclosure. But any new framework comes with a price: in this case opportunities for insurers to work within that new framework to create new arguments for avoiding policies and refusing to pay claims.

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Why it matters

“The [Marine Insurance Act 1906] is written in clear, forthright terms which can constrain the courts’ ability to develop the law.”

This criticism was made in the “Explanatory Notes” provided to members of the House of Lords when scrutinising the Insurance Bill which became the Insurance Act 2015 (“the Act”). The criticism is pregnant with the suggestion that a virtue of the new Act was that it would be less clear than, and more malleable by the courts than, the earlier legislation. Whether that objective is of comfort to those who have to apply the Act is open to question. It is certainly the case that, in one fundamental respect, the Act is ambiguous.

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Be careful what you wish for…..

Much of the discussion of the Insurance Act 2015 (“the Act”) might have been designed to induce complacency in policyholders. They might legitimately conclude that this piece of legislation was a gift from the gods to remedy the perfidy of insurers. This is particularly so when it comes to navigating the infamously treacherous waters of pre-contractual disclosure.  No longer, so it seems, will policyholders be held hostage to “technical” breaches of those hard to fathom rules.

Read More

“Where are the 2015 Insurance Act cases?”, is something I have heard everywhere I have been (even, once, on the beach in Cyprus). The obvious, tactless answer would be to invite the questioner to look inwards for the answer, but there is a potentially serious question lurking behind the anecdotal comments of so many.