In this issue: Regulation and legislation; Court cases and arbitration; Market developments; HFW publications and events
1. Regulation and legislation
UK: Prudential Regulation Authority’s Report on General Insurance Actuarial Function Reports (AFR)
On 5 February 2018 the Prudential Regulation Authority (PRA) reported back, following its review of AFRs from a number of general insurance firms over the past year. The PRA wanted to consider whether the Solvency II requirements were being met and whether the AFR findings were communicated effectively to the board of their principal firm.
Effective engagement with the chief actuary community is important to the PRA as the chief actuary makes an important contribution to the board’s decision-making processes and is well placed to provide effective analysis and advice to help the board navigate the issues arising from the insurance market and external environment.
2. Court cases and arbitration
UK: Fundamental dishonesty overrides substantial injustice argument
Further to our last bulletin’s report1 of the decision in LOCOG v Sinfield on the test for fundamental dishonesty in personal injury claims, in Razamus v Ministry of Justice the High Court has strictly applied that test.
The claimant alleged that medical professionals had failed to diagnose a tumour. It was subsequently discovered that the claimant had lied about seeking treatment during the relevant period.
UK: P.I. insurance: notification requirements – time bar- excess/deductible
This case1 applied the principles which were established in Kajima2, regarding valid notification of circumstances under claims made policies; it also dealt with insured loss mitigation expenses as first party costs for time limitation purposes; it contains an interesting discussion of the insured’s ability to “appropriate” insurer’s interim payments to time-barred claims, as well as a point regarding whether the “Insured’s Contribution” should be deducted from the recoverable policy limit.
The claimant insured was a specialist in installing and outfitting swimming pools, and it sought indemnity for what it argued were separate circumstances/claims under its two consecutive annual PI policies, which each had a £5m limit and materially identical wordings. Much of the claims consisted of loss mitigation expenses incurred to avoid/minimise liability to third parties and the costs of pursuing the third party pool designers.
UK: Is privilege secure in regulatory investigations?
Following on from the recent Serious Fraud Office (SFO) v Eurasian Natural Resources Corporation Ltd case1, the Chancery Division (Financial List) has published a judgment in which it confirmed that litigation privilege applied to interview notes created during an internal investigation. This judgment is good news for corporates, and the principles applying to privilege, as it goes against the widely criticised position taken in SFO v ENRC, in which the appeal is scheduled for July.
Bilta (UK) Ltd (in liquidation) & ors v Royal Bank of Scotland Plc & anor2, was a case involving alleged fraud leading to HMRC threatening an assessment against RBS with a view to clawing back some £86million of over-claimed VAT. The facts are complex, but in essence the VAT applicable to various trades of ‘carbon credits’ was paid to Bilta who subsequently went into liquidation, depriving HMRC of that VAT. RBS instructed its external lawyers to carry out an investigation into the alleged fraud. The case concerned the disclosure of the interview notes created during the investigation.
3. Market developments
Paris: A report to encourage cyber insurance
While cyber risk is increasing significantly and keeping pace with or outstripping the evolving technologies of computing and electronic systems, insurance solutions remain, for their part, at an embryonic state in Europe, which represents less than 10% of the world cyber insurance market.
The French Cyber Risk Commission, chaired by the President of the French Insurance Federation (FFA) has just published a report aimed at convincing the various actors influencing the cyber insurance market to favour the development of the offer of cyber insurance, as a condition precedent to a better protection against such risk.
4. HFW publications and events
Asia: HFW has been ranked as one of the top insurance law firms in Asia-Pacific
HFW has been ranked as a top insurance law firm in the Asia-Pacific region, in the APAC Insurance Law Report. The report, by Gracechurch Consulting, is based on interviews with more than 120 specialist claims technicians, adjusters, managers and directors at the world’s largest insurance companies.
Clients praised HFW’s “industry knowledge” and “global connections”, while HFW lawyers Mert Hifzi, Ranjani Sundar, Stephen Thompson and Patrick Yeung were all named as leading practitioners for insurance work across the region. It’s another win for our global insurance and reinsurance practice, having recently been named insurance law firm at the year at the MENA IR Insurance Awards for the second year running.
UK: HFW partners Christopher Foster and Andrew Bandurka named as “Star” lawyers
HFW partners Christopher Foster and Andrew Bandurka have been named as “Star” insurance lawyers by market research company Acritas.
The Star nominations are based on interviews with more than 4,300 senior in-house counsel around the world, who were asked to identify the best lawyers they had worked with in the previous year – and to explain what made those lawyers stand out.
In this issue: Court cases and arbitration; Market developments
1. Court cases and arbitration
England & Wales: High Court provides useful guidance on the meaning of ‘Fundamental Dishonesty’
The High Court in London in London Organising Committee for the Olympic and Paralympic Games (in Liquidation) v Haydn Sinfield1 provides guidance on the ‘Fundamental Dishonesty’ test. In this case the claimant suffered an accident as a volunteer worker at the 2012 Olympic Games and as a result had long-term disability. His claim included a claim for special damages for the costs of employing a gardener, which he claimed was only necessary as a result of his injuries. The claimant had a 2 acre garden and declared that a gardener had been employed for 2 to 4 hours of work per week, at a rate of £13 an hour, from the period commencing 9 September 2012. The claimant also sought special damages in relation to future losses for gardening. The gardening claim amounted to 42% of his total claim for special damages.
However, the defendant subsequently became aware that the claimant had, in fact, employed a gardener before he sustained the injury and there had been no increase in the hours worked on the garden after the accident. Further, the invoices for the gardener were found to have been created by the claimant without the gardener’s permission.
2. Market developments
Mexico: Probitas opens in Mexico
Probitas Syndicate 1492 has become the first Lloyd’s syndicate to join the Lloyd’s representative office in Mexico, demonstrating its commitment to servicing Latin America. The focus will initially be on providing facultative reinsurance for casualty and property business.
Lloyd’s regional head for Latin America and Lloyd’s representative in Mexico, Daniel Revilla, has been working hard to encourage managing agents to set up local offices in the region. Mr Revialla has explained that as Mexico is the largest source of premiums for Lloyd’s in Latin America and Probitas’ proximity to local stakeholders will likely secure them business that would not otherwise flow through the Lloyd’s market.
Europe: Windstorm Friederike: forecast to cost millions in economic losses
The estimated insured losses, resulting from windstorm Friederike which hit northern Europe earlier this month, are expected to top €90 million in the Netherlands and in Germany the losses could reach €500 million. The storm, which brought hurricane-strength winds of up to 90mph, is the most powerful storm to hit Germany in over a decade.
AIR Worldwide, the catastrophe risk modeller, has estimated the total insurance industry loss to be between €1.3 billion and €2.6 billion although their prediction does not include losses resulting from coastal or inland flooding, business interruption and additional living expenses for residential claims.