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UK: Update - Insurance Bill
The form of the Bill as introduced is in large part the same as the draft Bill that was published on 17 June 2014 with only some minor amendments.
The two clauses that were still the subject of further considerations last month, namely clause 11 (Terms Relevant to Particular Descriptions of Loss) and clause 14 (Implied Term about Payment), have both been removed from the Bill as introduced to the House of Lords. According to the Law Commission, the Government did not consider these provisions to be sufficiently uncontroversial for the special procedure for Law Commission Bills.
Further to this a new Part 6 has been inserted which makes amendments to the Third Parties (Rights against Insurers Act) 2010. These amendments are, however, relatively small and inconsequential, tweaking the definition of "relevant person" under this act.
These changes aside, the gist of the Bill is much the same as the previously published version. As set out in our earlier blog post the key impact of the Bill would be to introduce a "duty of fair representation" to replace the current duty of disclosure.
The remedies available to the insurer will also be amended.
(a) If the breach of the duty of fair representation is deliberate or reckless then the insurer may avoid the contract and refuse all claims and need not return any of the premiums paid.
(b) If the breach is neither deliberate nor reckless and the insurer would not have entered into the contract if aware of all of the information then the insurer may avoid the contract and repay all premiums paid.
(c) If the breach is neither deliberate nor reckless and the insurer would have entered into the contract but on different terms then the payment pay be reduced in proportion to the difference between the premiums paid and the premiums that would have been payable.
This Bill, if enacted would signify a large shift in UK insurance law which has remained largely unchanged, in the context of non-consumer insurance contracts, since the Marine Insurance Act 1906. But for now, it is a case of watch this space as to whether or not the Bill passes successfully through both Houses and whether or not there are any substantial amendments on the way.
The amendments to the Third Parties (Rights against Insurers Act) 2010 relate to the meaning of 'relevant person'. Once enacted, these amendments will pave the way for the 2010 act to be commenced.
A copy of the Insurance Bill as introduced into the House of Lords and the current status of the Bill is available on the English Parliament website at http://services.parliament.uk/bills/2014-15/insurance.html.
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