The Enterprise Act 2016 – How It Affects You
The Enterprise Act 2016
There is now only 1 month to go until the Enterprise Act 2016 passes into UK law. But what does this mean for me as a policyholder?
How does it affect me?
Any insurance policy which is sold or renewed from the 4th May 2017 will contain an implied term that your insurer will pay you any monies due on a valid claim ‘within a reasonable time’. If the insurer breaches this term, and unnecessarily delays paying out under the policy, then you may have a claim for any additional losses which you may suffer as a result. This had previously not been allowed under English law.
But what is a ‘reasonable time’ for the insurer to pay?
It will depend on various factors such as the size and complexity of your claim, the type of insurance cover that you have (i.e. what losses it is intended to insure), and any issues which may be outside of the insurer’s control e.g. lengthy, extreme weather events. It will not be unreasonable for an insurer to delay payment of a claim where they have a valid concern over whether the insurance policy should actually pay out. For example, they may consider that your claim is not covered under the terms of the relevant policy. As we say though, that concern has to be a valid one.
What sort of additional losses are we talking about?
Let’s take the example of a storm which has caused significant damage to the roof of one of your buildings. Where there is an obvious cause and your insurer has no other reason to challenge the claim, they will be expected to accept that claim and to implement emergency measures promptly e.g. by putting up scaffolding and a ‘tin hat’ to prevent further damage.
If your insurer takes longer to accept the claim than reasonably necessary – even if that is purely down to their slow internal / administrative processes – then they could be liable to you for any further damage occurring to the property whilst it is exposed to the elements.
These new rights will also potentially extend to additional financial losses which you might suffer, although these are ordinarily harder to prove. For example, if you are forced to take out emergency funding (such as a high interest bridging loan) to service your ongoing operations because of a delay on your insurer’s part, then you may have a claim for those additional interest charges and any other associated fees.
So what do I need to do if I have a claim for additional losses?
First, we will obviously be in close contact with you and your insurer throughout the course of any claim, and if we believe at any time that the insurer is delaying payments unnecessarily / unreasonably then we will take steps with them to protect your position, and we will talk to you about any additional losses which you have suffered or might suffer as a result.
On your side you should keep full, written records of any additional expense which has been created by the delay, together with supporting receipts etc. A diary / log to accompany this would also be useful. Basically, the more evidence that you can produce to show you have suffered a loss, the better your chances will be of recovering it.
Can an insurer wriggle out of this new law?
There are provisions within the new legislation which allow an insurer to ‘contract out’ of these new rules in certain circumstances; that is, they can say in the insurance policy that the rules will not apply. However, their ability to do so is limited.
An insurer can never contract out of the new provisions with consumer insurance i.e. Home & Contents, Motor cover etc.
An insurer can only contract out of the new provisions for commercial insurance where they make it clear to you and us that they are doing so. In reality however, we think it is unlikely that insurers – certainly insurers of small and medium enterprises – will look to do so, for commercial reasons.
Is there anything I need to do now?
No. If we believe at any time that your insurer’s conduct in relation to a claim potentially creates an issue under these new provisions we will discuss the matter immediately with you, and take any steps necessary to protect your position. In the meantime, however, if any of the above is unclear or you would simply like some further information then please feel free to get in touch on 01924 278222.