DAS Loss Assist appoint CCS panel member to Leeds laundry fire

DAS appointed CCS panel member Thompson & Bryan in February to deal with an extensive fire claim on behalf of a policyholder under their Loss Assist claims fees scheme.

Details of the work undertaken by T&B is set out below.

Initial work

We attended site within 24 hours and began the process of detailing damage to equipment and customer property. We discussed with the insured the business interruption cover available under the policy and alternatives they might consider to help them retain their customer base, including sub-contracting work to other laundries.

Potential indemnity issues

Following a meeting with the insurer it became clear that there were issues within the Statement of Fact provided by the insured that they wanted to investigate further, which could result in policy liability being denied.

The additional investigations included appointing a forensic scientist to establish the cause of the fire. This work involved taking statements from employees and interrogating the alarm and CCTV footage from the night of the fire. As these investigations progressed it became clear that the cause of the fire could result in the insured being in breach of policy conditions.

Quick action

We were determined to make sure that the insurer took into account mitigating factors that were in danger of being ignored.

We advised the client to instruct their own firm of forensic scientists and through our extensive network were able to recommend a suitable firm. The scientist conducted his investigation into the fire, which included analysis of the conclusions produced by the insurer’s forensic team and a review of the statements and CCTV recording.

Our scientist’s report concluded that the cause of the fire could not be disputed. It also raised a number of issues that could affect the implication of the policy requirements and whether insurers could rely on these to deny policy liability.

Throughout this process we maintained a constant dialogue with the client’s insurance broker, keeping them up to date with all the developments. This enabled the broker to make separate representations directly to insurers in support of the policyholder.

The result

Following the submission of our findings to the loss adjuster and after further negotiations, the insurer agreed to accept liability and deal with the claim under the terms of the policy.

This enabled us to immediately negotiate a substantial interim payment for our client and agree the machinery replacement costs so that the orders for new equipment could be placed quickly.

Summary

Without professional help the client would have struggled to reach a settlement with insurers. The combined efforts of the forensic scientist, broker and T&B, working in a coordinated way culminated in a positive result being reached.

The client was very impressed that we had access to similar professions as those appointed by insurers, which is one of the reasons why special praise must go to the client for having the foresight to purchase a DAS claims fees insurance policy from their broker.

Client comment

 “… From the first phone call and our initial first meeting I knew I had a formidable team representing me. The quality of the advice and manner in which it was given filled me with confidence. 

"Not knowing if the insurance were going to accept liability was so frustrating but John Leivers remained calm throughout, which really helped me to remain positive about the final outcome of my claim. He is a very shrewd negotiator and I am so pleased he was on my side. I cannot praise John Leivers and Thompson and Bryan enough.

"The £40 premium I paid for my claims fees policy is, without a doubt, the best £40 I have ever spent!”

CCS Managing Director Paul Lawrence in the news

Paul Lawrence was asked to comment on the flooding debate recently following the announcement by the Prime Minister of a £10 million fund to help small businesses.

Paul spoke in his capacity as Managing Director of Thompson & Bryan, the company that provides the loss adjusting services for DAS Loss Assist policyholders.

Paul reflected on how the industry can help going forward and the first crucial steps that should be followed after a flood to prevent adversely affecting an insurance claim. You can read the full article by following this link

Flood victims in Hull benefit from CCS claims expertise

CCS appointed claims panel member Thompson & Bryan to help a number of businesses in Hull following a combination of high tides and strong winds caused severe flooding throughout Hull and the surrounding areas in early December.

Below are a few examples of the businesses our panel member managed to help and support. In every case they were on-site within 24 hours of the flooding.

Humber Properties Ltd, Hull

Humber Properties are landlord to a variety of businesses and the floods affected many of their tenants occupying office space on the ground and first floors.

The ground floor, exterior yards and parking areas were flooded with up to 12 inches of water that left behind a residue of mud and silt.

Because of the extensive damage Humber Properties faced considerable loss of rental income from tenants who had been forced to evacuate and relocate.

Action Taken

We worked with Humber Properties to produce a plan of action that immediately mitigated further losses. Generators were hired to provide electricity for the first floor tenants, initial cleaning and stripping out was undertaken and dryers were installed.

Surveyors were appointed quickly and a schedule of repairs have been produced and sent out to tender.

M H Industrial Ltd, Hull

Water and mud residue caused considerable damage to the Company’s offices, warehouse and manufacturing areas as the floods receded.
Damage to machinery had an immediate and serious impact on the business and damage to their forklift truck fleet restricted their ability to rent them out to customers. Further extensive damage to the company’s ground floor hit their computer installations, including the main server, which was rendered inoperative.

Action Taken

Our first task was to quickly evaluate the losses by accurately detailing the extent of damage to machinery and equipment. To get the office back in action we quickly organised sub-contractors to install temporary computer systems. This element of the claim was agreed with insurers within 5 days.

Jenko Ltd, Hull

In this incident most of the damage from the water and mud residue was to the company’s offices, including computer networks, printing machines and paper and ink stocks, the latter being particularly susceptible to damp conditions.

Action Taken

To help our client deal with the immediate issues of replacing equipment we quickly reached an agreement on interim payments with the insurer’s adjusters. We were able to do this successfully by accurately assessing and agreeing the extent of the damage.
In parallel a specialist damage restoration company was instructed to carry out removal of the remaining water and install drying equipment. A surveyor was then appointed to identify the damage to the building and produce a schedule of repairs required.

Summary

The only thing our clients had in common was geography. Despite damage being caused by the same event these examples prove the frequently repeated phrase: ‘every claim is different.’

We selected Thompson & Bryan because they really understand that. They get to work fast, prioritise quickly and concentrate on the things that are important to the client. Every claim may be different but our proactive approach never changes.

Excellent result for Kent firm using CCS appointed panel member

A major fire effectively destroyed a Kent company's finished goods storage warehouse and caused extensive collateral damage to a neighbouring processing unit on Monday, August 8, 2011.

The severe fire damage to buildings, stock and machinery had a major impact on the operation of PPR Wipag's automotive plastics recycling facility, causing a total loss in excess of £500,000.

Immediate Actions

Thompson & Bryan, who are members of CCS’s claims panel secured instructions and attended the site the same day to meet the insured, gain an initial appraisal of the nature of their business and the extent of damage caused by the fire.

Immediate discussions focussed on loss mitigation and the nature of their manufacturing processes to identify how the business could be maintained to service its customer base.

T&B’s team of qualified and experienced staff worked continuously with the insured and their staff from day one to ensure the business continued as far as was practically and economically possible during the indemnity period through to agreement of the final claim circa 15 months later.

Settlement

The claim was ultimately settled on an overall negotiated basis to the benefit of the policy holder enabling them the flexibility and control to finalise the reinstatement of the affected property and their manufacturing processes.

Buildings - The insured was able to invest their insurance settlement in not only rebuilding but re-designing the layout of their manufacturing facility to improve efficiency for longer term benefit.

Plant and Machinery - The insured’s innovative bespoke process plant was reinstated to current specification and standards on a new for old basis as per the policy coverage. The insured was able to review and improve on their operational efficiencies as part of the reinstatement process for the longer term benefit and improved profitability.

Stock - Extensive analysis was required in order to ascertain the true cost value of the stock given that the manufacturing process entailed low cost raw material supply and extensive resource input in the manufacturing process.

Business Interruption - Critically, the loss mitigation measures employed enabled the majority of customer orders to be processed during the indemnity period, albeit at a substantial incremental cost.  Detailed calculations and analysis were undertaken to ensure the optimum recovery was achieved under the policy given the presence of both increased costs of working and additional costs of working cover.

Detailed analysis and calculations were performed in light of the apparent significant growth trend in the business.  A forecast of the sales was built up throughout the 12 month indemnity period to ensure the optimum recovery was achieved under the policy.

BI Policy Extension - Denial of Access and Loss of Attraction

Business Interruption is a very complex area and we frequently come across incidents that are not adequately covered by the policyholder’s BI insurance. Quite often, however, they could have been.

Businesses can be severely interrupted by incidents that occur in their vicinity even where there is no damage whatsoever at the business itself. This situation is catered for in a business interruption policy by way of a policy extension. There are two such extensions – Denial of Access and Loss of Attraction.

Denial of Access

Denial of Access is designed to cover situations where it becomes physically impossible for customers or staff to get to a business location. For example a major flood may not damage a policyholder’s premises on the 11th floor of an office block, but it could render the building and surrounding areas inaccessible until the waters subside, access roads are back in action and the whole property is declared safe. A Denial of Access extension would provide cover for the business interruption loss that might occur.

So, Denial of Access is all pretty straightforward? Well no, because businesses frequently face situations where access is not actually prevented or denied or even hindered. For example, a shop owner operating in a shopping centre could suffer a significant drop in trade following a serious flood to the basement car park levels beneath the shopping centre. The situation could also be compounded by virtually no on street parking being available close to the shopping centre. As a result footfall to the shopping centre might drop by more than 50 per cent.

A Denial of Access extension would not have helped the policyholder in these circumstances because access was not denied.

Loss of Attraction

However, a Loss of Attraction extension would have enabled the shop owner to make a successful claim because this extension provides protection where potential customers visiting the premises are denied access because of lack of desirability or convenience.

Loss of Attraction cover also protects business for reasons less obvious than issues such as floods. For example, many shopping centres have “anchor” tenants. These types of tenants are considered a major draw and the main reason for customers visiting the centre. If the “anchor” store suffers a loss that forces it to shut, the resulting loss in footfall can harm all the other shops in the centre. In these sorts of circumstances a Loss of Attraction extension can be used to make a claim.

Our advice

Denial of Access and Loss of Attraction extensions to a business interruption policy can really make sense and we recommend that they are always included in discussions with clients when arranging their BI protection.

Snapshot of the Lord Jackson Reforms

In April the Jackson Review on civil litigation and the Ministry of Justice (MoJ) consultation on the civil justice reforms relating to low value personal injury claims came into force.

They represent the largest overhaul to the personal injuries legal framework in England and Wales in over a decade. Some of the main aims of the reforms are:

• Making lawyers costs proportionate 
• Combating the compensation culture 
• Creating an environment where claims costs savings will lower premiums

The changes that will be most apparent to consumers are:

After the Event legal expense premiums will no longer be recoverable: ATE was often the mechanism no-win no-fee solicitors used to enable them to offer such services. It was a way of underwriting their costs if litigation failed. As a result, no-win no-fee services may be offered far less.

Referral fees banned: This type of referral, where the referrer receives money will no longer be legal.

Among other changes are limits on the amount that can be claimed, particularly with regard to injuries such as whiplash.

How will these changes affect your clients?

Claimants will need to provide fast and accurate claims notifications, including:

• Notifying actual or potential claims immediately 
• Ensuring information provided is accurate and complete 
• Providing all relevant documentation within shorter timescales 
• Providing immediate assistance with liability investigation 
• Supporting quick decisions on liability 

Summary
The objective of these reforms is to make claims settlements faster and a much less painful experience. Even non-claimants should benefit in the longer term as reduced fraud and extraneous legal fees produce more competitive insurance premiums.

Commercial Claims Solutions appointed to DAS Claims Assist Adjuster Panel

Press Release              

Commercial Claims Solutions are pleased to announce their appointment to the panel of Loss Adjusters providing claims services for the DAS claims fees insurance product called DAS Loss Assist.

Commercial Claims Solutions is a leading supplier of claims services in the UK and worldwide with an excellent reputation for negotiating claims for policyholders.

Paul Lawrence, Managing Director at Commercial Claims Solutions commented:

“Claims fees insurance is a relatively new concept with excellent opportunities for growth and we are pleased to be partnering with DAS, a market leading company with an excellent reputation in the claims sector, to help them deliver a high quality service to brokers and their clients.”

Mark Rhoder, head of ATE & Special Risks at DAS Group commented:

“It’s just a fact of life that in today’s economic climate businesses need much more help with claims, especially on a technical level, to get back on their feet than ever used to be the case. For us to deliver on the promises made in the Loss Assist policy we have to make sure that the claims team we have around us have the highest levels of technical knowledge and experience. Commercial Claims Solutions has proven to us that they have and we are very pleased they have come on board.”

A little risk management goes a long way

We are heading for another bout of poor weather so we thought we’d pull together some tips for you to pass on to your clients to help them avoid unnecessary claims.

There is no doubt icy conditions produce more claims for slips and trips than at any other time of the year so if your clients operate from a premises they need to be vigilant to the potential risks to visitors (and employees) of being injured in icy conditions.

The Issue

Even relatively short bursts of poor weather and low temperatures can produce hazardous conditions underfoot that last for many days, and sometimes weeks after the initial event.

Most commercial buildings have some external areas that are used by employees, deliveries or the general public and building owners or tenants have an obligation under health and safety legislation to keep every pedestrian traffic route within the premises free from substances that may cause someone to slip, trip or fall.

The Solution

If a business operates from a premises they should have a plan to deal with the problem should it arise. Consideration should be given to the following when formulating your plan:

Resources
Businesses should know what manpower and equipment they are likely to have available should bad weather strike. Practically how many staff will be available (usually needed early morning) to clear areas and spread grit? Do they have sufficient equipment readily available on site, including sufficient grit and the means to transport it around the site?

Prioritise
Businesses need to decide which areas should be cleared for the premises to operate safely. Priority should be given to the building’s entrances, including goods and visitor entrances as well as staff entrances. It may be impractical to keep all car parks and areas clear so decide what needs to be done to ensure untreated areas are not used.

Maintain
Everyone in the business should be aware of their responsibilities within the plan. Make sure they have a plan to maintain the areas that have been cleared so that they do not re-freeze over.

Communicate
Employees should be informed of the bad weather plan in advance and be aware of the areas that will be prioritised for clearing so that they know what to expect when they arrive for work. Signs at the entrance to public areas should be used advising visitors of untreated areas. It should be made clear that they use untreated areas at their own risk.

Record
A premises specific risk assessment for operating the site in bad weather should be carried out and recorded.

Ted Baker v AXA and Others

This case demonstrates the importance of knowing exactly which insurance terms and condition are in place for a particular risk and the importance of brokers placing a client's risk correctly.

The Facts

Ted Baker pursued a claim against AXA asserting that they had cover for a claim under the terms and conditions of their commercial combined insurance policy. First they said that there was cover for the losses under the Theft section of the policy. They then argued that consequential losses were covered under the terms of the Business Interruption section of the policy.

Over a number of years the retailer had been the victim of thefts by one of its employees who acted in collusion with delivery drivers. The retailer asserted that by reason of a standard form theft extension clause, cover was in place for this type of theft.

The claim was resisted by AXA on several counts. They alleged that theft by an employee was not covered under the terms of the policy as a matter of construction and that if "surreptitious theft" by an employee were to be covered by an insurance policy then it would only to be covered under the terms of a fidelity policy.

Other defences were also raised relating to mistake, rectification and estoppel. There were also co-insurers involved and they ran parallel defences but also alleged non-disclosure by the broker of the fact that this was unusual cover and that it ought to have been disclosed by the broker.

The Judgement

Despite 21 witnesses being called, the vast majority by the Defendants, the court held that the plain and simple words used in the theft extension clause meant that non forcible and violent theft by an employee was covered under the terms of the insurance policy and that the retailer was covered for its direct losses. It did not go against business common sense as alleged by the Defendants.

Similarly the Defendants could not allege that market practice was to the effect that this kind of cover was not available. The Defendants had attempted to give such evidence both with lay witnesses and with their expert. The judge found that the words used in the policy could not be displaced by any such allegation.

Similarly the Defendants attempted to argue that the parties were trying to replicate the cover formerly given by the defunct Independent Insurance Company. Again the court held that this could not displace the actual terms and conditions of the policy.

On the basis of the policy terms it was therefore found that Business Interruption loss was similarly covered under the terms of the policy. An exclusion clause based on "fraud and dishonesty" was held not to apply.

The court held that there were no "shared assumptions" and therefore the Defendants plea of estoppel also failed.

The Defendant's allegations of non-disclosure and misrepresentation on the part of the retailer's brokers also failed

Comment

The Judgement demonstrates that an insurance company faces an uphill task in trying to persuade a court that despite what a policy says, the terms did not represent what the parties wanted. In this case the majority of the Defendants' arguments were dismissed "in limine", in effect the Defendants' cases did not get over the first hurdle. Quite simply if the terms and conditions of a policy make it clear what is covered, the court will hold that to be the case.

You can read this case study in full here:

High Court Decisions - Baker v Axa

  

*We’d like to offer a special thank you to Nichola Evans at Browne & Jacobsen for providing a summary of this legal case study.

The agent's role in disclosing material facts

Yong Sheng Goldsmith Pte Limited v Liberty Insurance Pte Limited [2011]

This interesting case looks at the question of disclosure of material facts and the role that agents can play as a conduit between insurer and insured.

The Facts

The Claimant was a jeweller and held insurance with the Defendant company under a jeweller’s block policy. An armed robbery took place at the Claimant’s premises and the Claimant duly made a claim under the policy.

The Defendant sought to void the policy on the ground that there had been material non disclosure. They suggested that the Claimant should have advised they had been subject to harassment from a loan shark. The Claimant alleged that the information had been disclosed to the Defendant via the Defendant’s agent. This agent had dealt with the policy and the renewal process.

The Finding

Even thought the agent acted for a number of insurers the court found that he was the agent of the Defendant company, one reason being that he was registered as an agent of the Defendant. As he had knowledge of the loan shark this knowledge was imputed to the Defendant.

Comment

Again this case stresses the need for full disclosure of material facts. The insured would have been left in some difficulties had the material facts not been communicated to the agent. Insureds should make sure that all material facts are disclosed – and keep the documentation. It could prove invaluable in the event of a claim!

False statements come out in the wash

Synergy Health (UK) Limited v CGU Insurance PLC [2010]

A key question in many insurance cases is how and in what circumstances can an insurer void a policy of insurance where there has been the provision of incorrect information. This Commercial Court case decided in 2010 gives some guidance.

The Facts

The Claimants operated a laundry business in Dunstable. In late 2005 the Claimant said that the premises would very shortly be protected by an alarm. The Claimant’s material damage and BI policy were renewed some four months later. In February 2007 the Claimant’s premises were damaged by fire and a claim was  made under the terms of the insurance policy.

The insurers attempted to avoid the policy on the grounds of the false statement made. The assured had made the statement innocently based on incorrect information.

The Findings

The matter ran to trial and the Judge made the following findings:

• The Claimant had misrepresented matters. 
• Further, there was non-disclosure – the fact that there was no alarm ought to have been disclosed pursuant to s18 of the Marine Insurance Act 1906. 
• The non-disclosed fact was material.
• However the court found that the policy could not be avoided as there was no inducement. 
• Interestingly the insurers had not provided any evidence as to what their stance would be had they known the true facts, for instance as to whether this would have resulted in a higher premium.
  
  

Comment

Whilst on this occasion the court held that there had been no inducement to enter into the insurance contract, insureds or potential insureds must be very careful as to the information which they provide to their brokers and/or insurers. The court found that by telling their insurers four months before renewal that an alarm was being installed this went beyond a mere intent to install a system and sent out a message that work was underway. An insurance contract is a contract of utmost good faith and therefore if a fact looks relevant or may influence the terms of the insurance contract then it must be disclosed to insurers.

Information flow between parties is critical

Ground Gilbey v Jardine Lloyd Thompson UK Limited [2011]

Over the past few years we have seen a number of important decisions involving the role of insurance brokers and how critical it is that there is a flow of information between the parties. This case emphasises that and the consequences when people get it wrong.

Fact

This claim relates to a fire at Camden Market and was brought by the owner of Camden Market.

A survey of the premises was carried out in 2005 and identified the use of LPG portable heating appliances. The Claimant duly banned their use but stallholders continued to use them. On the renewal of the insurance policy in 2007 the policy contained a new endorsement – a survey condition requiring completion of all risk improvements. The Claimant alleged that this condition was not brought to their attention.

On 9 February 2008 a fire broke out at Camden Market. The owners made a claim under the terms of the insurance policy. The policy condition was raised by the insurers. The owners settled their insurance claim for £3.825M which represented approximately 70% of the claim leaving a shortfall of approximately £1.7M. The Claimant sought to recover the shortfall from their insurance brokers.

Findings

The court found that the brokers had acted in breach of duty in three respects:

• A failure to find a policy allowing the use of portable heaters.
• Failure to give advice on the policy condition.
• A failure to pass on a critical email in relation to the removal of portable heaters to the owners.

The Claimant was able to recover its losses in full and the court would not entertain an allegation that there had been any contributory negligence by the owners before the fire.

Comment

This case again shows the importance of essential information being passed between insureds and insurers and that this duty extends to the parties’ agents. When difficulties emerge in the context of a claim, it is important to investigate every angle, consider the documentation and investigate as to whether all information has been communicated to the parties.

The enigma of mysterious loss

Underwriting Services Ltd [2010] EWHC 3244 (Comm)

The discord between a "mysterious disappearance" clause, which discharges the insurer from liability if it can prove that the insured's loss was mysterious, and the accepted position under an All Risks policy that the insured is able to recover by proving a fortuitous loss is clearly illustrated in Underwriting Services Ltd [2010] EWHC 3244 (Comm).

The facts of the case are simple: a loss occurred which the evidence clearly indicated was caused by theft, and the insurers failed in their attempt to invoke the "mysterious disappearance clause". Nonetheless, Gloster J elected to comment on a number of issues of principle, ruling that under an All Risks policy the insured was tasked with proving that loss had accidentally occurred, with no requirement to demonstrate the specific cause of the loss. Given that the insured had satisfactorily proven such loss, the burden fell to the insurer to illustrate that the exception applied. The challenge was whether a "mysterious disappearance" clause affected that position.

In Widefree Ltd v Brit Insurance Ltd [2010] EWHC 3671 (a case in which this firm acted successfully for the claimant), the All Risks policy of a jeweller included a clause which prevented the insured from recovering where it was "unable to prove the date and circumstances of any loss". The court held the impact of the provision was that the jeweller had to prove its loss regardless of the fact that the policy was All Risks. This statement however was obiter since the provision only applied to losses which were discovered during stocktaking and, as the court subsequently held, the loss was revealed under other circumstances.

In AXL, the judge identified that the wording of the clause in Widefree varied substantially from that in AXL. Thus the correct interpretation in the case before Gloster J was that the insured was required simply to prove a loss – not to provide the cause of such loss – after which the burden of proof fell to the insurers to demonstrate that the loss concerned was mysterious. The analysis raises the predicament for insurers of when, under an All Risks policy, they can establish mysterious disappearance. Gloster J put forward two possibilities:

1. Insurers could convince the court that the evidence of the loss was so lacking with regard to the cause that it provided the real possibility that the loss was indeed a result of a "mysterious disappearance". Examples of such a case might include mis-delivery of goods or unauthorised delivery to an unknown recipient.
   
   
2. Insurers could present evidence that a real possibility existed that the loss was caused by a particular type of "mysterious disappearance".

Gloster J held that there was no requirement for an all-embracing or exclusive definition of the circumstances comprising "mysterious loss"' as the definition will be dependent on the context. Nonetheless, it will commonly involve circumstances where the basis of the loss cannot be established or where any explanation of loss is suspicious or based on speculation.

In AXL however, there were no such concerns since the evidence strongly implied that theft was the cause of the loss, and thus even if AXL had been required to disprove "mysterious disappearance", they had discharged that burden.

"When you have eliminated the impossible, whatever remains, however improbable, must be the truth." Sherlock Holmes.

Consequences of the Judgement
Gloster J's ruling highlights the discord between All Risks cover and a "mysterious disappearance" clause.

Under the All Risks cover, the insured must prove solely that a fortuitous loss has been suffered, after which the insurers must demonstrate that some aspect of the loss was mysterious. It then falls upon the insured to disprove that assertion by proving how the loss happened, a concept which is entirely alien to All Risks Cover. A mysterious loss clause thus appears incompatible with All Risks cover, and any decision by an insurer to repudiate a claim on that basis should be scrutinised carefully

Edwin Coe LLP work with CCS and kindly contributed this article for your information.

Relying on the competence of predecessors

Beazley Underwriting and another v Travelers Companies Inc [2010]

The scenario is this:
"Broker 1 negligently arranges an insured's policy of insurance, and that error is repeated at renewal by Broker 2. Can Broker 2 escape liability and blame Broker 1 in the event of a loss, or at least obtain a contribution from Broker 1?" The short answer is no.

In Standard Life Assurance v Oak Dedicated [2008] it was held that the policy of the client, Standard Life, was deficient in certain cover provisions and that the broker, Aon, was negligent for providing unsuitable insurance. But Aon was not the original broker of the policy; it had simply renewed cover that had been established by a prior broker (Special Risk Services) which was acquired by the Minet Group, which was further acquired by Aon. Part of the acquisition terms of the Minet Group by Aon was for a deed of indemnity against loss, liability, claims or costs which arose out of an event that occurred prior to the Minet acquisition. Therefore, upon being found liable for negligence, Aon sought an indemnity from Travelers (the previous owner of the Minet Group). Travelers settled with Aon and then claimed against its insurers for the amounts paid to Aon.

"Undeservedly you will atone for the sins of your fathers" - Horace

However, in Beazley Underwriting and another v Travelers Companies Inc [2010] the court found that the unsuitability of the insurance policy provided to Standard Life was solely the negligent act of Aon who had renewed the policy following the acquisition of Minet. It did not matter that Minet (or Special Risk Services) had made the original error in terms of suitability of cover, as, upon renewal, Aon owed a duty of care to Standard Life to obtain suitable insurance cover.

The judge in Beazley –v- Travelers did not consider what competent brokers do in practice – he simply imposed a duty on brokers which did not take into account evidence of what a component broker does or should do.

Even if expert evidence had been considered, it is likely that the same conclusion would have been reached. The FSA makes very clear the distinction applied to advised and non advised sales, and describes at length the extent of the documentation required to establish a retainer based on an execution only transaction.

"Here's what I've got now, see what you can do..."
If the sale is made without advice, the firm that sold the product should be able to demonstrate through their records that the customer selected the product without any specific recommendation. If it is unable to demonstrate that agreement, then the fact that the insurance was previously arranged by a reputable broker, or was required at short notice, or was sought solely to obtain a cheaper premium ("here's what I've got now, see what you can do") will not absolve the current broker when a problem arises.

Edwin Coe LLP work with CCS and kindly contributed this article for your information.

Developments in Consumer Insurance Law

The Consumer Insurance (Disclosure and Representations) Act 2012 received Royal Assent last month and is expected to come into force in 2013.

The Act provides welcome update of consumer insurance law, shifting the balance of the law in favour of the consumer. It follows on from the Law Commission's 2009 Report on Consumer Insurance Law, which set out to ensure that consumer insurance law be clear, straightforward and fair. The reform also demonstrates the benefits in responding to industry consultation papers, which address potential changes in legislation.

'Clear, straightforward and fair'

The Act defines a "consumer insurance contract" as a contract of insurance between an individual who enters into the contract wholly or mainly for purposes unrelated to the individual's trade, business or profession.

Main legal changes to consumer insurance

• The Act abolishes a consumer insured's duty to volunteer information to the insurer. A consumer's duty will be limited to making sure it answers questions raised by insurers honestly and reasonably.
• Insurers will have to ensure they ask for any information they need to assess the risk being insured. If a consumer acts honestly and reasonably the insurer will have to pay the claim.
• Where a consumer acts carelessly, a proportionate remedy will be applied; the test will be what the insurer would have done had it known the full facts.
• An insurer will only be able to refuse to pay a claim if a consumer acts deliberately or recklessly in making misrepresentations.
• An insurer will need to prove on the balance of probabilities that a consumer knew:
  a) that a deliberate or reckless misrepresentation was untrue or misleading, or did not care whether it was or not; and
  b) that the matter was relevant to the insurer, or did not care whether it was or not. If a misrepresentation does not pass this test then
  it will be a careless representation and must be treated accordingly.
• If the intermediary is an appointed representative of the insurer, or is acting as the insurer's agent, they will be considered as acting for the insurer. In all other cases the intermediary will be presumed to be acting for the consumer.
  

Other provisions Insurers will be prohibited from contracting out of the effect of the Act. Importantly, the Act also abolishes basis of contract clauses, so that statements made by the consumer will not automatically be transformed into warranties.

For group schemes, if a group member makes a misrepresentation, this will only have consequences for the particular individual concerned.

If a consumer takes out life insurance on the life of another and the insured makes a careless or deliberate misrepresentation, the insurer will have the normal remedies.

The Act is a small but welcome step in redressing the balance of power between Insurers and consumers, and brings the law into line with the practice already adopted by the Financial Ombudsman Service and Financial Services Authority rules.

Edwin Coe LLP work with CCS and kindly contributed this article for your information.