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What general rules, requirements and procedures govern the filing of insurance claims?
The terms of the insurance contract will govern the filing of claims. Notification requirements differ from policy to policy depending on whether the policy in question is claims made or losses occurring. In claims-made policies, the requirement will typically be to notify the insurer of a claim or a circumstance which may lead to a claim as soon as possible or within a stipulated time after the insured becomes aware of it. Typically, notification must be in writing and copies of the relevant documents must be provided along with full details of the claim and circumstances.
The code also sets out claims processing requirements which apply to insurers including, among other things, a requirement to have in place a written procedure for the effective and proper handling of claims and also to ensure that any claim settlement offer made to a claimant is fair. In circumstances where a claim is declined, insurers must provide the claimant with the reason for the decision and also written details of any internal appeals mechanisms available. The code also sets out certain requirements which apply to insurance intermediaries who assist a policyholder in making a claim.
What is the time bar for filing claims?
Section 11(1)(a) of the Statute of Limitations Act 1957 provides that actions founded on contract shall not be brought after the expiration of six years from the date on which the cause of action accrued (ie, the date of the breach of contract). Claims for breach of contract must therefore be instituted, by issuing court proceedings, within this time.
The Financial Services Ombudsman (FSO) also has jurisdiction to investigate complaints from consumers about their individual dealings with all financial services providers that have not been resolved by the providers. However, no complaint can be made to the FSO if the conduct at issue occurred more than six years before the complaint is made, except in the case of long-term financial services which may include certain life insurance products (at the time of writing, legislation to provide for such longer period has been enacted but has not yet been commenced).
Insofar as this question concerns the time within which a claim must be submitted by an insured to an insurer, this should be made in accordance with the terms of the insurance contract, in particular, the notification conditions.
Denial of claim
On what grounds can the (re)insurer deny coverage?
An insurer can refuse to cover a claim if it is not within the insuring clause of the policy (ie, the scope of cover provided for by the policy), if there has been a breach of a condition precedent or warranty by an insured or if the claim is specifically excluded under the policy.
An insurer can also avoid the policy for non-disclosure of a material fact or a material misrepresentation.
What rules and procedures govern the insured’s challenge of the denial of a claim?
The rules and procedures that govern the insured’s challenge of the denial of a claim depend on the forum in which he or she chooses to challenge the denial.
An insured should first look at the complaints handling and dispute resolution provisions of the insurance contract. If the contract contains an arbitration clause, the dispute must be referred to arbitration. However, a consumer will not be bound by an arbitration clause where the term was not individually negotiated and where the claim is less than €5,000, unless the arbitration agreement was entered into after the dispute arose. The Arbitration Act 2010 (which came into force on June 8 2010) has applied the United Nations Commission on International Trade Law Model Law and applies to all Irish arbitrations.
The general actions for breach of contract are available to the insured (subject to the terms of the insurance contract providing otherwise). Thus, where an insurer has failed to pay a valid claim, an insured would have an action for damages against the insurer. Such claims are brought through the Irish courts and are subject to the normal rules and procedures applicable to the courts. If damages are inappropriate, the court may grant specific performance (however, this is a discretionary remedy, so the courts will also take into account other considerations).
If insurers have avoided the policy, an insured may also bring an action seeking a declaration that the policy is valid and subsisting and responds to the claim at issue.
If an insured wishes to challenge the denial of a claim, Section 11(1)(a) of the Statute of Limitations Act 1957 should be considered (see “What is the time bar for filing claims?” above).
If an insured chooses to make a complaint to the FSO, the insured must do so within the time limits and demonstrate that they have first exhausted the insurer’s internal complaint procedure and that the complaint cannot be resolved.
On what grounds can a third party file a claim directly with the (re)insurer?
A person who is not party to (or who is not an insured person under) the insurance contract between the insurer and the policyholder generally has no rights at common law against the insurer. Such a person is caught by the privity of contract rule which means that only the parties to the contract (those parties privy to it) have enforceable rights and obligations under the contract.
There are certain exceptions to the privity of contract rule, for example Section 76(1) of the Road Traffic Act 1961, which affords a person claiming against an insured motorist certain remedies against an insurer.
The Irish government has proposed draft legislation in the form of the Consumer Insurance Contracts Bill 2017 which provides for third parties intended to benefit under an insurance contract to be permitted to make a direct claim against the insurer in certain circumstances.
Are punitive damages insurable?
Insurers can choose to cover or exclude punitive damages. Therefore, whether an insurer will be exposed to claims in respect of punitive damages depends on the terms and conditions of an individual policy. From an insurer’s perspective, the policy would ideally include a provision specifically excluding the payment of punitive or exemplary damages. In any event, punitive damages are likely to involve some manner of wilful deceit or neglect on the part of the insured, something that is likely to be exempted from cover.
What regime governs (re)insurers’ subrogation rights?
In insurance terms, subrogation is the process whereby an insured’s subsisting right of action is transferred to the insurer. Subrogation is based on the principle of indemnity and is justified on the basis that once reimbursed by the insurer, the insured should not be unjustly enriched through recourse against the person responsible for their loss. In Ireland, once the insured has been fully indemnified in respect of an insured loss, the insurer is entitled to issue and control proceedings (in the name of the insured) against the person(s) responsible for the loss which gave rise to the insurer’s obligations under the insurance contract.
Certain conditions must be satisfied before an insurer may exercise rights of subrogation, namely that:
- the insurance is an indemnity insurance;
- the insurer has made payment under that policy; and
- there is a connection between the subject matter of the insurance and the rights of an insured to which the insurer are subrogated.
These rights can be modified by incorporating into the policy the conditions which enable insurers to take over the right before they indemnify an insured or which exclude the insurer’s rights of subrogation.
In certain circumstances an insurer may agree to waive its subrogation rights at the request of an insured.
Some insurance contracts will not have a condition entitled ‘subrogation’ but will have a condition giving insurers control of claims and the right to prosecute any claims at their own cost.
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