Making the Claim

Question 1

What piece of legislation changed the doctrine of privity of contract?

Answer 1

The Contracts (Rights of Third Parties) Act 1999  brought change in the common law. It provides that a third party  can enforce a contractual term if:
• the contract provides that they may do so; or
• the contract purports to confer a benefit on the third party.

Question 2

Doctrine confines the rights and duties under a contract to the persons who originally made it. What circumstances where a person other than the person who made the contract with the insurers can claim on, or benefit from, an insurance contract?

Answer 2

1. Assignment- assign to 3rd party
   2.Agency- 3rd authorises the policyholder to insure on their behalf. agency by ratification.
2. Trust - common in life
   4.Policies with ‘additional insureds’ e.g liability
3. Policy ‘Noting the interest’ of third parties
   6.Road Traffic Act 1988- victim of a road accident can claim against the motor insurer of the
   negligent driver who caused the accident
   7.Third Parties (Rights Against Insurers) Act 2010- rights to be transferred to a third party in the case that
   the insured is facing financial difficulties
   8.Law of Property Act 1925- benefit of any insurance effected by the property vendor is automatically assigned to the purchaser
   9.Fires Prevention (Metropolis) Act 1774- person who has a legal or equitable interest in buildings e.g lessee, mortgagee can effectively compel the owner or their insurers to reinstate the property
   if it is damaged or destroyed by fire

Question 3

breach of time limits of notification of loss/claim

Answer 3

-If the notification clause is a condition precedent to insurer’s liability,, have the right to deny liability for the loss.
-However, if the notification obligation is a mere condition, the insurer will indemnify the insured. —-However, in the case of a breach of a condition, if the insurer is prejudiced because of the insured’s late
notification (lost the opportunity to investigate the cause) the insurer can make a deduction reflecting the prejudice (e.g. 15%) from the payment to the insured.
-N/a to motor and employers liability-pay regardless

Question 4

The burden of proving the loss remains with the

insured. To discharge the burden of proof, the insured must be able to establish two things

Answer 4

-that the loss was caused by the operation of an insured peril; and
- the amount of his loss.
These things must be established by the insured ‘on the balance of probabilities

Question 5

The loss must be fortuitous

Answer 5

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

Question 6

burden of proof (of recklessness) rests on

Answer 6

insurer

Question 7

claims handling rules require insurers (ICOBS 8)

Answer 7

-handle claims promptly and fairly;
-provide reasonable guidance to help a policyholder make a claim and appropriate nformation on its progress;
-not unreasonably reject a claim (including by termination or avoiding a policy); and
- settle claims promptly once settlement has been agreed.
-intermediaries must not put themselves in a position where their own interests, or their duty to another party (e.g. to an insurer), conflict with their duty to any
customer (i.e. insured).

Question 8

Enterprise Act 2016 (DAMAGES FOR LATE PAYMENT)

Answer 8

the insurer must pay any sums due in respect of the claim within a reasonable time. Breach of this provision will result in contractual damages, in addition to the sums due under the policy and any interest on those sums.

Question 9

doctrine of proximate cause

Answer 9

the loss in question must result directly from the operation of an insured peril if the insurance is to respond

Question 10

what is the rule for concurrent interdependent causes i.e where more than one interdependent event caused the loss

Answer 10

If one insured and one uninsured event are competing, the insured event prevails and the loss is deemed to have been caused by an insured risk. If one excluded and one insured event are competing, the exclusion prevails and the insurer may successfully reject liability

Question 11

The burden of proof

Answer 11

named policy-The burden is on the insured to prove that an insured peril was the proximate cause of the
loss
all risk -the insured does not have to prove the operation of any specific peril and need only prove that the loss was accidental.

Once the insured has established ‘prima facie’ (‘on the face of it’) loss by an insured peril the burden shifts to the insurers. If they wish to reject the claim they must prove in turn that an excepted peril was the proximate cause of the loss.

Question 12

Four types of fraud involved in claims

Answer 12

1. Falsification of a loss – i.e. the insured makes a claim when they have suffered no loss.
2. Deliberate loss – i.e. a policyholder deliberately causes the loss in order to bring a claim.
3. Exaggeration of a loss – i.e. if the insured exaggerates the amount of loss, the claim
   would be fraudulent.
4. Lying about the circumstances of a genuine loss to improve the chances of a claim being paid by the insurer.

Question 13

Burden of proof for fraud

Answer 13

In order to enforce its rights to a civil remedy following a fraudulent claim, an insurer will need to meet the civil standard of proof which requires that they establish that the person committed fraud ‘on the balance of probabilities’.

Question 14

Fraudulent devices

Answer 14

these are fraudulent statements that are designed to increase the likelihood of a claim being paid out,
where the underlying claim may be genuine (and valid under the policy).

The historical position has been that where such fraud is established, the insured would forfeit their claim.

Question 15

Remedies for fraud claims ( first party)

Answer 15

a. Prior to IA 2015, the remedy for making a fraudulent claim was ‘forfeiture of the entire claim’
b. After IA 2015
-If the insured makes a fraudulent claim, the insurer is not liable to pay the claim. It may recover any sums paid in respect of the fraudulent claim and can treat the contract as having been terminated with effect from the time of the fraudulent act (s.12(1)).
• If the insurer terminates the contract, it does not have to return any premiums paid and it may refuse to pay any claims arising after the time of the fraudulent act (s.12(2)).
-This does not affect any claims relating to events occurring before the fraudulent act (s.12(3)).

Question 16

Remedies for fraud claims (GROUP INSURANCE)

Answer 16

Section 13 provides that when one of the insureds (e.g. an employee) makes a fraudulent claim, this does not have an effect on the other employees who are insured under the same insurance and whose claims were not fraudulent. Similarly, if the contract is terminated by the insurer against the fraudulent employee, the contract does not mean termination for
the other insured employees who did not commit any fraud.

Question 17

Remedies for fraud claims ( 3rd party injury claims)

Answer 17

Before where it was established that the third
party has fraudulently exaggerated their claim, the approach of the courts was allow the genuine element of the claim in the event where it was established that the claim was partly fraudulent.

This position has been changed by the Criminal Justice and Courts Act 2015 s.57, the entire claim
should be struck out by the court.