Summary: This is our pick of the key recent legal issues in the insurance and reinsurance sector.
Non-Disclosure and the Insurance Act 2015: AXA v ARIG and Dalecroft Properties v Underwriters
In AXA v ARIG, the Court of Appeal recently agreed that AXA had failed to show it would have declined to underwrite a risk if a fair presentation had been made. The risks in dispute were placed in the mid-1990s. Although the Insurance Act 2015 duty of fair presentation did not apply, the Court decided the insurer would need to prove inducement by reference to a hypothetical, objective question - “what a reasonably prudent underwriter would think needed to be disclosed in order to give a fair presentation of the risk”.
In Dalecroft, the Commercial Court agreed with arguments that Dalecroft had misrepresented the risk or made non-disclosures in relation to risks placed between 2007 and 2009 (pre-Insurance Act 2015), which entitled underwriters to avoid the policy. The Court was satisfied that the insured had “made no real effort to make fair presentation of the risk”, and so the claim would (on its facts) fail under the Insurance Act as well.
Notwithstanding that neither case concerned policies that were subject to the Insurance Act, each Court appears to have given some consideration to the duty of fair presentation contained in section 3 of the Act.
Breach of duty of care in relation to mesothelioma revisited: Bussey v Anglo Heating
English law has adopted a modified test for causation to address the problems posed by mesothelioma. The recent decision in Bussey, however, is a reminder that a claimant must still prove that the defendant was negligent and/or in breach of duty.
A widow was seeking damages from the defendant former employer for negligence/breach of statutory duty following the death of her husband from mesothelioma. Following the earlier Court of Appeal decision in Williams v University of Birmingham  EWCA Civ 1242, the Court held that the correct test for breach of duty, where there was more than de minimis exposure to asbestos, was whether the degree of actual exposure made it reasonably foreseeable to a defendant that as a result of its conduct a claimant would be exposed to the risk of contracting mesothelioma (based on its knowledge at the time). It was held that the best guide as to acceptable levels of exposure at the relevant time were set out in the Factory Inspectorate Technical Note 13 of 1970 (“TDN 13”). On the facts, the victim had not been exposed to levels of asbestos dust above those set out in TDN 13 and therefore, the defendant was not in breach of its duty.
Pre-action disclosure of insurance policy refused: Peel Port v Dornuch
The Claimant sought pre-action disclosure of an insurance policy. It argued that if the policy was disclosed and showed that there was no cover, it would not pursue the defendant (as the defendant did not have the means to pay the claim) or insurers which would avoid litigation and costs. The Defendant argued that if disclosure of insurance policies was available under the Civil Procedure Rules (CPR 31.16), there would be no point in the Third Parties (Rights against Insurers) Act 2010 which contained a specific regime for the provision of information (not disclosure) about a defendant's insurance position where a Defendant is insolvent.
The Court in Peel Port refused to order the disclosure of the policy on the basis that a solvent Defendant’s insurance policy is not generally disclosable unless it is relevant to the issues in dispute (which it is not). In this case, the circumstances were not sufficiently exceptional to order disclosure of a solvent insured's insurance policy contrary to established practice.
Terrorism and business interruption
Abhorrent events such as those recently seen in London and Manchester can have long lasting effects on local businesses: premises can be kept closed for weeks while investigations are carried out. Pool Re recognises that there is a potential insurance gap for business interruption arising from non-property damage. While the market might wish to control its future exposure to terrorism related BI losses, no doubt insureds will be more mindful than ever to ensure that their BI cover extends to terrorism incidents of the types seen recently.
Exclusion clauses in commercial contracts: Contra proferentum rule now of limited relevance: Persimmon v Ove Arup
The Court of Appeal has confirmed that, in fully-negotiated commercial contracts, negligence can be excluded by general words. The Court held that the contra proferentum rule and the Canada Steamship guidelines are now of limited relevance in interpreting commercial contracts.
The FCA’s renewed focus on general market insurers
The FCA is now looking more closely at conduct in the general insurance market. The FCA’s new business plan introduces a number of new FCA reviews into the general insurance market including:
- A market study on the wholesale insurance market;
- Value in the distribution chain; and
- Firms' pricing practices.
The PRA is also investigating broker facilities, and it is expected that this work will feed into the FCA reviews on value in the insurance distribution chain and the study on the wholesale insurance market.
The FCA’s business plan also highlighted the importance of IT resilience for insurers in the context of operational risk.
Separately, the FCA will be implementing the senior managers regime for general market insurers in 2018. The impact of this regime will be significant. In particular, it will almost certainly result in all staff (other than those performing purely administrative roles) becoming subject to individual conduct rules that can be enforced by the regulators.