We wrote here about the Insurance Act 2015 back in 2016, and thought it would be timely to issue a reminder about one of the key changes it introduced, especially now that it has been in force for a good 18 months and most renewals will have been made under its provisions.
Billed as the most significant reform in commercial insurance contract law in the UK for over 100 years, the Act has replaced the pre-contract ‘duty of disclosure’ with a new ’duty of fair representation’. And remember, a block of flats – no matter how large or small – is considered commercial property for insurance purposes.
What does this mean in practice?
If you make an honest mistake and forget to tell your insurer something then, so long as it can be demonstrated that your mistake was neither deliberate nor reckless, insurers can only limit their liability in proportion to the amount of premium they charged compared with what they would have charged had there been full disclosure.
Also, they cannot reject a claim for non-disclosure outright, unless the breach is relevant to the loss, for example, failure to comply with an alarm setting warranty will have no bearing upon a flood claim
The Act requires you to tell insurers anything that you and or your co-directors and managers ought reasonably to know. ‘Ought to know’ includes senior management knowledge, the insurance buyer’s own knowledge and other information held elsewhere in your organisation that could be established by a reasonable search.
In other words, do be sure to check with all directors and managers before routinely renewing a policy.
Examples of information you need to offer (even if not specifically asked) are:
- Changes in occupancy.
- Installation, alteration or disconnection of fire and/or security systems.
Roof covering being replaced – whether for the same or different product.
Installation of cladding or insulation materials or other changes to the construction of the property insured or items fixed to it.
- Electrical or plumbing works undertaken.
- Permissions given to leaseholders for significant alterations.
- Anything you find that has been omitted from previous proposals, for example, flat roofing on outhouses or garages.
Insurance renewal reminder!
Don’t just automatically renew cover each year. Check through the policy. Pro-actively ask co-directors and other leaseholders if there’s anything they know about. If in doubt about the relevance of any information, just ask us and we’ll be more than happy to check for you.
Remember: non-disclosure could put you at risk of not having claims for the costs of repairs of replacements paid in full, if at all.
It may sound as if not much has changed but remember that the Act could help you because it imposes a greater onus upon insurers to behave fairly and reasonably when you make a claim. That said, the free flow of information it encourages should also reduce the likelihood of a dispute arising in the first place.
The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited trading as Deacon accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered because of any person relying on the information contained herein. The opinions and views expressed in the above articles are those of the author only and are for guidance purposes only. The authors disclaim any liability for reliance upon those opinions and would encourage readers to rely upon more than one source before making a decision based on the information.