BREXIT: Insurers need certainty soon about future of cross-border contracts, says expert
ANALYSIS: Insurers and reinsurers require clarity soon on whether passporting rights, or a workable equivalent, will remain in place in relation to cross-border policies after Brexit, or whether they will need to make alternative arrangements. The 'grandfathering' question - that is, whether insurers can continue to rely on current passporting rights in dealing with existing customers after Brexit - is an increasingly urgent one for insurers. If this issue is not addressed early during Brexit negotiations, insurers may be left with the choice of breaking local law by acting without authorisation in relevant countries after March 2019, or not being able to honour contracts with their European customers.
Without grandfathering, insurers may need to choose to either sell the portion of their business involving the cross-border policies or move those policies to an EU subsidiary business. Both of these solutions would involve following the court process set out in Part VII of the Financial Services and Markets Act (FSMA). The process has a rigid timeline and would need to be completed before the UK exits the EU to be effective in relation to regulators in other EU jurisdictions where cross-border policies are held.
Insurers have 'duty to speak' in claims management, rules Court of Appeal
LEGAL UPDATE: Insurers have a positive obligation to make their position plain with insureds in the course of managing claims, the Court of Appeal has ruled. This 'duty to speak' arises from good faith obligations in normal commercial contracts and not because of the more onerous utmost good faith obligations in insurance contracts. Those additional obligations, however, may "enlarge the circumstances in which a duty to speak arises". In the case the Court said that Ted Baker's insurer should have said that it was still waiting for certain information and that, in not providing it, Ted Baker was in potential breach of a condition of its insurance policy. Although Ted Baker's appeal was dismissed on other grounds, this ruling by the Court of Appeal is significant for insurers. Insurers are under no obligation to warn insureds generally of the need to comply with policy conditions – this has not changed.
London insurance market consults on new approach to low-value multi-party claims settlement
A new approach to settling low value multi-party insurance claims in the London market should be introduced in time for the January renewals season, according to the industry. Members of Lloyd's, the Lloyd's Market Association (LMA), the International Underwriting Association (IUA) and the London and International Insurance Brokers' Association (LIIBA) have been sent a draft of the new 'single claims agreement party clause' for consultation, according to Insurance Day (registration required). Representatives of the four market bodies drafted the clause, following a proposal from LIIBA and the broking community. The new clause would allow the lead insurer on a policy to authorise claims up to a certain value on behalf of all participating carriers. Parties to the insured risk would be able to agree to adopt the clause at the point of underwriting.
Three-yearly discount rate reviews should reduce 'shocks' for insurers, says expert
Insurers will welcome government proposals to reform the way in which the 'discount rate' applied to lump sum personal injury payments is calculated following the dramatic change announced in February. Insurance expert at Pinsent Masons, Colin Read said: "The changes announced in February 2017 created significant disquiet within the insurance industry. A flurry of insurer-ministerial meetings followed that decision and reflected how the original discount rate had proved an unexpected surprise to insurers, many of whom were in the middle of reporting annual results. The revised figure is likely to bring the 'Ogden rate' within a range originally anticipated before February's changes. It is to be hoped that a fairer system, with less of a 'shock' value, could follow from the three-yearly review process set out by the government."
Does saying "sorry" have a role to play in resolving international construction disputes?
ANALYSIS: Lawyers involved in international construction are familiar with an armoury of schemes for avoiding and resolving disputes, including dispute avoidance boards, resolution boards, international arbitration, and others. But does saying "sorry" have a role to play? Hong Kong's Legislative Council recently passed a bill that encourages the use of apologies as a means of settling disputes. Under the bill an apology does not constitute an admission of fault or liability and is not admissible in evidence, but can still provide a cost-efficient way to ease tensions and resolve disputes for parties to a construction dispute.
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