I am delighted to share with you our Insurance & Professional Risks Annual Review of 2022 which looks back over the last 12 months on the key legal cases and developments affecting the insurance sector. Each section includes links to the articles on our blog which provide a more detailed analysis on specific topics: www.hsfnotes.com/insurance. For a helpful overview of the cases covered in the Review this year, The Year in Cases at a Glance section lists out all the cases with links to our articles.
2022 saw a number of important insurance cases handed down by the English courts. In particular, the first case to consider section 13A of the Insurance Act 2015 which gives policyholders the right to claim damages for late payment of an insurance claim. Cases arising from the Covid-19 pandemic also continued following the judgment of the Supreme Court in the FCA's business interruption test case in 2021. The Covid-19 business interruption claims section of this Review provides an overview of these decisions as well as what is on the horizon in this space in 2023. There were also decisions on familiar topics such as aggregation, co-insurance and the Third Party (Rights Against Insurers) Act 2010.
Outside the world of insurance, our Professional liability section looks at some of the key cases involving legal professionals, on topics including the duties owed to third party non-clients and conflicts of interest. 2022 saw very significant changes in the law governing building safety in the UK – the Fire Safety Act 2021 which came into force in May 2022 and the much-anticipated Building Safety Act 2022. Both new statutes are the result of a comprehensive review of how building safety is regulated following the Grenfell Tower fire in 2017 and are explored in Health and Safety. We also consider the first Supreme Court judgment on the trigger for liability under the Consumer Protection Act 1987 in Product liability
Our General interest section looks at what 2022 had in store from the perspective of the commercial litigator including the Disclosure Pilot becoming a permanent new Practice Direction and the courts grappling with the new rules on witness statements. Class actions remain a hot topic and I was delighted that the latest edition of the firm's second edition of Class actions in England and Wales, written by Herbert Smith Freehills lawyers now includes an entirely new chapter on insurance co-authored by Greig Anderson and Sarah Irons.
We predicted in our Review last year that 2022 would be a busy year from a regulatory perspective and this proved to be correct. Our Regulatory section takes you through the government's plans for post-Brexit reform of the regulatory landscape including the Edinburgh Reforms, proposals in the Financial Services and Markets Bill and expected Solvency II reforms. It also looks at the FCA's new Consumer Duty which the FCA published the final rules for in July 2022 and comes into force on 31 July 2023. Unsurprisingly, ESG continues to be high on the agenda with ESG-related transparency set to be the theme for the next 12 months.
Damages for late payment
In Quadra Commodities S.A. v XL Insurance Company SE and Others  EWHC 431 (Comm), the court considered for the first time the application of section 13A of the Insurance Act 2015. Section 13A implies a term into every insurance contract made after 4 May 2017 that "the insurer must pay any sums due in respect of the claim within a reasonable time". Breach of this term can give rise to a claim for damages giving policyholders the right to claim compensation in the event of late payment of their insurance claim. There are various elements that a policyholder will need to prove in order to establish a successful claim for damages:
- The insured has a valid claim under the policy;
- The insurer has failed to pay within a reasonable time (including a reasonable time to investigate and assess the claim);
- The insured suffered loss, which was caused by the insurer's breach of the implied term; and
- The loss was foreseeable (ie the loss was in the reasonable contemplation of the parties at the date the contract was entered into).
Further, the insured will not be able to recover any loss which could have been avoided by taking reasonable steps.
In Quadra, the court confirmed that the "reasonable time" within which to pay an insurance claim will be judged on a case-by-case basis and found there were two questions to consider:
- What was a reasonable time within which the insurer should have paid the claim? The onus being on the insured to establish this.
- Were there reasonable grounds for insurers to dispute the claim? The onus for this question being on insurers.
While the court found no breach of the implied term in this case, the case provides useful guidance in considering these questions. The judgment also provides some useful clarity as to what constitutes an insurable interest (see First case on the implied term to pay claims within a reasonable time – section 13A Insurance Act 2015.) This case is being appealed.
The issue of co-insurance arises frequently in insurance disputes and was considered most recently in The Rugby Football Union v Clark Smith Partnership Limited and FM Conway Limited  EWHC 956 (TCC) (see Subrogation and co-insurance considered again). This judgment considered a number of the well-known authorities in this area including Co-operative Retail Services Ltd v Taylor Young Ltd , Tyco Fire & Integrated Solutions (UK) Ltd v Rolls-Royce , Gard Marine & Energy Ltd v China National Chartering Co Ltd  and Haberdashers' Aske's Federation Trust Ltd v Lakehouse Contracts Ltd . The court in RFU v Clark Smith considered the scope of cover provided to a contractor under an All-Risks Butcher J found that there was a "single occurrence" in the collective decision taken jointly by the four UK governments on 16 March 2020 to advise the public to avoid pubs, restaurants and clubs. He also went on to find that the instructions given to all pubs, bars and restaurants to close on 20 March 2020 was a "single occurrence". In Various Eateries, Butcher J also accepted that there were other "occurrences" relating to the UK government response should they be relevant:
- 24 Sept 2020 – implementation of early closing and other restrictions on restaurants
- 14 Oct 2020 – three-tiered system brought into force
- 5 Nov 2020 – imposition of second lockdown
Butcher J felt that these "occurrences" met the unities test as set out in Kuwait Airways Corp v Kuwait Insurance Co SAK . He did not, however, accept that there were separate occurrences when measures were renewed, immaterially changed or relaxed.
To view the full article click here
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.