8 - Making the Claim

Question 1

Why may Insurers exclude the operation of the Contracts (Rights of Third Parties) Act 1999?

Answer 1

To make it clear that a third party cannot enforce or claim under the policy

Question 2

What is the main statutory exception to the doctrine of privity of contract?

Answer 2

The Road Traffic Act 1988

(Allows a third party to make a claim under the wrongdoer’s motor policy even though they are not a party to the policy and allows named drivers to enforce the contract)

Question 3

What happens to a claim if the wrongdoer becomes bankrupt or goes into liquidation before the claimant has recovered damages?

Answer 3

The right to enforce the policy is transferred to the claimant under the Third Parties (Rights Against Insurers Act) Act 2010

Question 4

Who does the “burden of proof” in proving a loss rest with and what must they prove?

Answer 4

The Insured. They must show that the loss was caused by an Insured peril, and prove the amount of the loss

Question 5

What may a claims notice condition do?

Answer 5

Require the Insured to give notice to the Insurer of a loss, and may impose a time frame in which to do so.

It may also require the Insured to give notice of any incident or event which may give rise to a claim (even if they do not make a formal claim at the time)

Question 6

What do the claims handling rules in ICOBS require an Insurer to do?

Answer 6

1. Handle claims promptly and fairly
2. Not unreasonably reject a claim
3. Provide reasonable guidance to help make a claim
4. Provide appropriate updates on the its’ progress
5. Settle the claim promptly once agreed

Question 7

What degree of proof applies in insurance?

Answer 7

On the balance of probabilities

Question 8

The Enterprise Act 2016 introduced Section 13A of the Insurance Act 2015. What does this do?

What was the legal position before this?

Answer 8

S13A makes it an implied term in all insurance contracts that the Insurer must pay all sums due in a reasonable time. It allows a court to award damages to a policyholder where late payment has caused them further loss

Prior to this the position was that the claim payment was itself damages for breach of contract - the Insurer has failed to stop the claim happening. The legal position is that you cannot sue for damages due to damages being paid late, only collect interest on them

Question 9

What is the doctrine of causation called?

Answer 9

Proximate cause

Question 10

What are the three classes of perils in a named perils policy?

Answer 10

1. Insured perils
2. Excluded perils
3. Uninsured perils

Question 11

What are the two classes of perils in an all risks policy?

Answer 11

1. Insured perils

2. Excluded perils

Question 12

What case is the leading authority on proximate cause? How did this change the approach to proximate cause?

Answer 12

Leyland Shipping v Norwich Union Fire Insurance Society Ltd (1918)

It was held that the cause needed to be “proximate in efficiency” - prior to this it was the closest in time

Question 13

If it is not possible to determine which of two independent events caused a loss what happens if:

a) One event is insured and one is uninsured?
b) One event is insured and one is excluded?

Answer 13

a) The insured event takes precedence and the loss is covered
b) The exclusion takes precedence and the Insurer can decline liability

Question 14

Can an Insured claim for prevention costs?

Costs incurred when taking an action to avoid a loss

Answer 14

No, unless stated in the policy. There is no entitlement to them in law but some policies provide this as an extension

Question 15

How can the doctrine of proximate clause be modified? Give an example

Answer 15

It can be modified by policy wording

For example Insurers may exclude losses caused “directly or indirectly” by a peril. This would exclude any loss arising from the peril even if it was only a remote cause

Question 16

What are the four types of fraudulent claims?

Answer 16

1. Falsification of a loss
2. Deliberate loss
3. Exaggeration of a loss
4. Lying about the circumstances of a genuine loss

Question 17

What does the term “fraudulent device” mean?

Answer 17

False statements intended to increase the likelihood of a genuine claim being paid out

Question 18

What happens in the event fraud is established during a claim?

Answer 18

Previously the Insured would forfeit their claim however a Supreme Court case of Versloot Dredging VC v HDI Gerling (2016) has complicated this by holding that the fraud must be relevant to the existence or amount of the Insured’s entitlement, so it may not always be possible for the Insurer to avoid the claim in every instance

Question 19

Where does the burden of proof lie when claiming fraud?

Answer 19

In a criminal prosecution it would have to be proved beyond a reasonable doubt

An Insurer claiming fraud would be a civil action where the usual standard is on the balance of probabilities - however fraud was held by the High Court in S and M Carpets v Cornhill Insurance Company (1981) that fraud needs to be held to a higher standard

Question 20

What is the common law case that established the remedy for making a fraudulent claim and what is this remedy?

Answer 20

The Star Sea (2001)

Forfeiture of the entire claim

Question 21

What legislation sets out the remedies available to Insurers in the event of a fraudulent claim?

Answer 21

The Insurance Act 2015

Question 22

What does Section 12 of the Insurance Act 2015 set out as the remedies available to Insurers following a fraudulent claim?

Answer 22

The Insurer is not liable to pay the claim, may recover any sums paid, cancel the contract with effect from the time of the fraudulent act, and keep any premiums paid

Question 23

What is an uninsured peril?

Answer 23

A peril which is not insured but is not specifically excluded