The risk of insurance claims not being paid due to innocent non-disclosure is major worry for corporate insurance buyers according to a recent survey of risk managers.
Fortunately new disclosure proposals put forward by the Law Commissions could resolve the problem if new legislation is enacted.Airmic, the organisation which represents risk managers at leading UK businesses said that more than half of its members cited innocent non-disclosure of material information as being their top ‘stay awake at night’ insurance buying concern. The findings were published as part of Airmic’s membership survey at its 2013 annual conference.
Their concerns could be addressed by new legislation proposed by The Law Commission and Scottish Law Commission. The Commissions have been undertaking a long term project to reform insurance contract law. Many of their recommendations have already become law – with changes to consumer insurance disclosure having come into force in April this year. The Consumer Insurance (Disclosure and Representations) Act 2012 replaced the old duty of disclosure for consumers with new and less onerous duty to take reasonable care not to make a misrepresentation to the insurer.
Now the Law Commissions have turned their attention to the issue of disclosure in business insurance. In an article, The Law Commissions and insurance contract law reform: an update, published in the current issue of The Journal of International Maritime Law, they sets out their latest thinking. They suggest that the existing concept of ‘fair presentation’ is placed at the heart of business disclosure and that a regime of `proportionate’ remedies for insurers is introduced. The Commissions are planning for a final report and draft Bill to be published in early 2014.
“These radical proposals could lead to a major change in the way professional indemnity insurance non-disclosure cases are resolved and could swing decisions in favour of the insured,” said James Burgoyne, Director, Brunel Professional Risks. “These proposals are definitely in the best interests of our professional clients. Let us hope that a new Bill is put forward in 2014 – which could lead to the proposals becoming law as soon as 2015.”
