The Law Commissions have published a draft bill which  they believe is “settled”, save for two clauses which remain  controversial. These are the clauses which (1) provide  that where a policy term (e.g. a warranty or a condition  precedent) is designed to reduce the risk of a particular  type of loss (or the risk of loss at a particular time or in a  particular place) a breach will only entitle the insurer to  refuse claims for losses falling within those categories;  and (2) provide that it will be an implied term of an  insurance contract that insurers will pay sums due within  a reasonable time and late payment will attract damages  from the insurer. 

The Law Commissions are still hoping that the bill will  follow the uncontroversial Law Commission Bills route.  However, HM Treasury, which would be the sponsoring  department, first wishes to consult on whether the draft  bill (either with or without the two clauses mentioned  above) has a broad consensus of support in order to  follow that procedure. This consultation (which will end  on Wednesday 2 July) differs from the Law Commissions’  earlier consultation on the draft bill, which was concerned  only with the question of whether the bill accurately  reflected the Law Commissions’ policy objectives (as set out  in their earlier consultation papers). The Law Commissions  are aware that this Parliamentary session is short (ending  on 30 March 2015) and this new approach heightens the  possibility that the two clauses mentioned above will  be omitted from the final bill in order to ensure that the  rest of the bill stands a chance of becoming law prior to  the next election. If so, not only will the (arguably) most  controversial aspect (for insurers) of the draft bill – late  payment damages- be dropped in its entirety, but the  reforms to warranties will be significantly watered down  (leaving only the abolition of basis of the contract clauses  and allowing the possibility of a breach of warranty being  remedied (and the insurer coming back on cover), where  that is possible).

The latest draft bill can be viewed here: