Chapter 8 - Making the claim

Question 1

What is the common law doctrine that initially restricts the rights and duties under a contract to the parties who originally made it?

Answer 1

The common law doctrine is the doctrine of privity of contract.

Question 2

How should one determine who can claim on or benefit from an insurance policy?

Answer 2

It is necessary to look at the wording of the policy to determine whom the contract covers and who can claim under it.

Question 3

What are some circumstances where a person other than the one who made the contract with the insurer can claim on or benefit from an insurance contract?

Answer 3

Some circumstances include:
Contracts that provide for specific third parties to be able to claim.
Contracts that confer a benefit on a third party.
Exceptions established by well-established practices and legal precedents.

Question 4

Can contracts or the benefits of contracts be assigned to third parties?

Answer 4

Yes, contracts or the benefits of contracts can be assigned to third parties.

Question 5

What is the difference between a legal assignment and an equitable assignment?

Answer 5

a legal assignment, the assignee can enforce the contract in their own name. In an equitable assignment, the assignee must join the assignor in the action.

Question 6

How can a third party gain the right to claim on an insurance policy?

Answer 6

A third party can gain the right to claim on an insurance policy under the rules of agency, where the policyholder authorizes the third party to insure on their behalf.

Question 7

What is the doctrine of the undisclosed principal, and how does it apply in insurance?

Answer 7

The doctrine of the undisclosed principal applies in insurance, allowing the principal to take advantage of the contract by ratifying it subsequently, even if the agent had no authority to contract on behalf of the principal.

Question 7

Under what circumstances can a trust be established in insurance?

Answer 7

A trust can be established in insurance, particularly in life insurance, where a person insures their own life expressly for the benefit of another. Section 11 of the Married Women’s Property Act 1882 provides a method for creating such trusts.

Question 8

What are the advantages of establishing a trust in insurance?

Answer 8

The advantages of establishing a trust in insurance include:
On the death of the insured, the policy money goes directly to the beneficiary and is not counted as part of the insured’s estate.
If the insured becomes bankrupt, the beneficiary can usually claim the policy money without being subject to the claims of the insured’s creditors.

Question 9

What is a commercial trust, and how does it relate to insurance?

Answer 9

A commercial trust can arise in connection with the insurance of property, where a person holds the balance of the insurance money in trust for others with an interest in the goods.

Question 10

What are some examples of statutory exceptions to the doctrine of privity of contract in insurance?

Answer 10

Some examples of statutory exceptions to the doctrine of privity of contract in insurance are:
Road Traffic Act 1988
Third Parties (Rights Against Insurers) Act 2010
Law of Property Act 1925
Fires Prevention (Metropolis) Act 1774.

Question 11

What is the purpose of granting indemnity to persons other than the main insured in insurance policies?

Answer 11

The purpose is to provide protection to various individuals, such as principals, owners of hired plant, and employees/directors of the insured firm, who may be at risk in case of accidents or liabilities arising from the insured activities.

Question 12

What is the significance of ‘noting the interest’ of third parties in property insurance policies?

Answer 12

‘Noting the interest’ of third parties in property insurance policies does not make them parties to the insurance contract, and it is unlikely to bring the Contracts (Rights of Third Parties) Act 1999 into play, providing little or no significant legal protection to the third party.

Question 12

Are there typically time limits for notifying a claim to insurers?

Answer 12

Yes, insurers may impose time limits for notification, such as 15 or 30 days.

Question 13

What happens if the insured fails to comply with the time limit for notification?

Answer 13

If the notification obligation is a condition precedent to insurer’s liability, insurers may deny liability for the loss. However, if it’s a mere condition and insurers are prejudiced due to late notification, they can make deductions from the payment to the insured.

Question 14

Are deliberate acts by persons other than the policyholder covered by insurance policies?

Answer 14

Yes, intentional damage by others, such as family members or employees, may be covered as long as the insured has no involvement in their actions.

Question 14

In what cases does English law prohibit insurers from rejecting liability due to late notification?

Answer 14

In the case of compulsory classes of motor and employers’ liability insurance, insurers cannot reject liability based on late notification.

Question 14

What is the burden of proof in establishing coverage for a loss under an insurance policy?

Answer 14

It is the responsibility of the insured to prove that the loss was caused by a covered peril and to establish the amount of loss.

Question 15

What is the insurer’s responsibility regarding exclusions to an insurance policy?

Answer 15

It is the responsibility of the insurer to prove that an exclusion to an insurance policy applies to the claim.

Question 15

What is the general rule regarding insurance coverage for losses caused by negligence?

Answer 15

Insurance policies typically cover losses caused by negligence, as one of the main purposes of liability insurance is to protect against the consequences of the insured’s own negligence.

Question 16

How might insurers seek to limit liability for losses caused by excessive carelessness?

Answer 16

Insurers often include a ‘reasonable precautions’ clause in the contract, requiring the insured to take all reasonable care to protect the insured property or prevent accidents.

Question 17

What requirement does the law impose regarding the nature of the loss in insurance policies?

Answer 17

The loss must be accidental or fortuitous, meaning it must not be deliberately caused by the insured or brought about by the insured’s own wilful misconduct.

Question 17

Why might it be challenging to apply the doctrine of proximate cause in practice?

Answer 17

Applying the doctrine of proximate cause can be challenging because outcomes often depend on specific facts of each case rather than matters of law, and different decisions may be reached in similar cases due to finely balanced facts.

Question 18

Under what circumstances might insurers extend coverage for losses caused deliberately by the insured?

Answer 18

Insurers may extend coverage for losses caused deliberately by the insured in the case of suicide under a life policy.

Question 18

What is the difference between negligence and recklessness in the context of insurance claims?

Answer 18

Negligence refers to failure to act reasonably, while recklessness means not giving attention to the consequences of one’s dangerous actions.

Question 19

Do the ICOBS rules apply only to consumers, or do they also cover commercial customers?

Answer 19

The ICOBS rules cover both consumers and commercial customers, extending to both private and business insurances.

Question 19

What are the obligations of insurers in handling claims according to the FCA Insurance: Conduct of Business (ICOBS) Rules?

Answer 19

Insurers are required to handle claims promptly and fairly, provide reasonable guidance to policyholders, not unreasonably reject claims, and settle claims promptly once agreed upon.

Question 19

Who bears the burden of proof regarding recklessness in insurance claims?

Answer 19

The burden of proof of recklessness rests on the insurer.

Question 19

What potential issues regarding causation can arise in insurance policies?

Answer 19

Disputes may arise regarding whether a loss resulted directly from an insured peril or from an excluded peril, especially when multiple perils are involved.

Question 20

What duties do intermediaries handling claims have under the ICOBS rules?

Answer 20

Intermediaries, such as insurance brokers or agents, must ensure that their own interests or duties to another party do not conflict with their duty to any customer (insured).

Question 20

What factors are considered when determining the proximate cause in insurance policies?

Answer 20

Perils insured and perils excluded in the policy are considered when determining the proximate cause of a loss, which may include various natural disasters, weather events, civil disturbances, and other risks depending on the policy terms.

Question 20

What does section 13A of the Insurance Act 2015 require regarding payment of sums due under a claim?

Answer 20

Section 13A requires insurers to pay any sums due in respect of a claim within a reasonable time, with breach resulting in contractual damages in addition to the sums due under the policy and any interest.

Question 20

How does the doctrine of proximate cause govern issues of causation in insurance?

Answer 20

According to the doctrine of proximate cause, the insurer is liable for any loss proximately caused by a peril insured against, but not liable for any loss that is not proximately caused by a peril insured against.

Question 21

How does determining the proximate cause relate to the intention of the parties in an insurance policy?

Answer 21

In insurance, determining the proximate cause is essential for understanding whether the parties intended the loss to be covered under the policy.

Question 21

How is the concept of proximate cause described in insurance law?

Answer 21

Proximate cause is described as the most powerful or efficient cause of the loss, and it is the cause that is most directly linked to the resulting damage. Remote or indirect causes are disregarded in favor of identifying the proximate cause.

Question 21

How does the burden of proof apply in insurance claims regarding proximate cause?

Answer 21

The burden of proof lies with the insured to show that an insured peril was the proximate cause of the loss. Once the insured establishes prima facie evidence of loss by an insured peril, the burden shifts to the insurer to prove that an excluded peril was the proximate cause.

Question 22

What are the different approaches to defining insured perils in insurance policies?

Answer 22

Some policies specify named perils, while others provide coverage on an ‘all risks’ basis. Named perils policies list insured perils and exclusions, while ‘all risks’ policies cover any fortuitous loss unless specifically excluded.

Question 22

How can the doctrine of proximate cause be modified or excluded in insurance policies?

Answer 22

Insurers may modify the doctrine of proximate cause through policy wording, such as excluding certain risks directly or indirectly. This modification can widen or narrow the scope of coverage, depending on the language used in the policy.

Question 22

How do insurance policies typically address efforts to avoid or reduce loss?

Answer 22

Insurance policies often require the insured to take reasonable precautions to prevent or mitigate losses. While damage to insured property is covered, expenses incurred solely for prevention or mitigation purposes may not be covered unless the policy explicitly states otherwise.

Question 22

What factors contribute to determining the proximate cause of a loss in insurance law?

Answer 22

Courts typically apply a common-sense approach to identify the proximate cause, considering the most efficient cause that led to the loss. In cases of concurrent events, where multiple causes contribute to the loss, the most efficient cause is identified as the proximate cause.

Question 23

What does MIA 1906 state about the proximate cause of loss?

Answer 23

MIA 1906 states that the proximate cause of loss must be a ‘peril insured against’.

Question 24

What are concurrent interdependent causes in insurance?

Answer 24

Concurrent interdependent causes are multiple events that contribute to the loss, where neither would have caused the loss on its own.

Question 24

How are insured perils defined in insurance policies?

Answer 24

Insured perils are defined differently based on the policy type. Some policies specify named perils, while others provide coverage on an ‘all risks’ basis.

Question 25

What distinguishes between named perils policies and ‘all risks’ policies?

Answer 25

Named perils policies specify insured perils and excluded perils, while ‘all risks’ policies consider any peril not specifically excluded as an insured peril.

Question 25

How can the doctrine of proximate cause be modified in insurance policies?

Answer 25

The doctrine of proximate cause can be modified by the specific wording of the policy, such as by excluding certain risks directly or indirectly.

Question 25

How are prevention costs treated in insurance claims?

Answer 25

Prevention costs are generally not covered unless explicitly provided for in the policy, such as with marine policies containing sue and labour clauses.

Question 25

What is the burden of proof in insurance claims?

Answer 25

The burden of proof falls on the insured to show that it was more likely than not that an insured risk caused the loss.

Question 26

How is the proximate cause defined in insurance law?

Answer 26

Proximate cause is described as the most powerful or effective cause of the loss, disregarding remote or indirect causes.

Question 26

How does the Proceeds of Crime Act 2002 assist insurers in recovering losses from fraudulent claims?

Answer 26

It allows for the recovery of assets fraudulently obtained, even if a conviction cannot be made.

Question 27

What recent Supreme Court case has impacted the treatment of fraudulent claims involving collateral lies?

Answer 27

The Versloot Dredging case clarified that a collateral lie may not necessarily result in the forfeiture of the entire claim.

Question 27

How is fraud defined in insurance, according to the ABI?

Answer 27

Fraud in insurance is defined as inventing or exaggerating a claim, or providing false information to obtain cheaper cover.

Question 27

What are the four types of fraudulent claims discussed?

Answer 27

Falsification of a loss
Deliberate loss
Exaggeration of a loss
Lying about circumstances to improve claim chances

Question 28

What action can insurers take under the Criminal Justice and Courts Act 2015 regarding fraudulent personal injury claims?

Answer 28

If the claimant is found to be fundamentally dishonest, the court must dismiss the entire claim.

Question 28

What standards of proof apply to criminal prosecution and civil remedies for fraud?

Answer 28

Criminal prosecution requires proof “beyond a reasonable doubt,” while civil remedies require proof “on the balance of probabilities.”

Question 28

What is a “fraudulent device” in insurance claims?

Answer 28

A fraudulent device refers to statements designed to increase the likelihood of a claim being paid out, even if the underlying claim is genuine.

Question 29

How does the law regulate fraudulent claims in the case of group insurance policies?

Answer 29

Fraudulent claims by one insured do not affect the claims of other insured parties under the same policy.

Question 29

How does the law handle fraudulent claims under the Insurance Act 2015?

Answer 29

The insurer is not liable to pay fraudulent claims, can recover sums paid, and may terminate the contract.

Question 29

What legal recourse does an insurer have against fraudulent parties under the tort of deceit?

Answer 29

An insurer can pursue a claim for its losses against a fraudulent insured or third party.

Question 30

under the RTA 1988 The right to make a direct
claim under section 151 arises in cases where?

Answer 30

The accident victim has obtained a judgment against the negligent driver (that is, the court has ordered the driver to pay compensation to him)

The driver has failed to satisfy the judgment within seven days