Charities & the Enterprise Act (Insurance)
While the Enterprise Act received royal ascent in May 2016, one aspect of the act, relating to insurance claims is only coming into force on Thursday May 4th, 2017.
The act in broadest terms was designed to support smaller organisations who may have been historically disadvantaged by their stature when dealing with much more powerful bodies.
Changes made in the wider legislation allowed for the creation of a small business coalition service to help small businesses resolve disputes without resorting to the courts. Reforms to business rates were made and caps were bought in to avoid future six figure redundancy settlements in the public sector.
The element of the act that relates to insurance, concerns claims. Currently, it is not possible in the law to recover losses that a group might incur because an insurer has delayed settling a claim. Only the claim itself can be recovered from the insurer. The new legislation creates a situation in which, it is an implied part of the insurance contract that the insurer must pay any sums due within a reasonable time frame.
Of course, a ‘reasonable time’ is open to interpretation and the act acknowledges this and suggests that a court might in future take into account the type of insurance policy, the size and the complexity of the claim itself as well as factors outside of an insurers control.
At Ladbrook, we would certainly see it as a positive step to give policyholders a legal right to enforce prompt settlement of claims. In the event of a large claim, a charity might be forced to close if settlements were unduly postponed. The fact that policyholders can now pursue limited compensation if they have suffered additional losses can only incentivise insurers to pay promptly.
While the act is a good signal of intent, bringing a claim against an insurer might prove tricky, simply due to the hurdles that one must overcome. An ‘insured’ would have to demonstrate that the original claim was valid, that the insurer failed to settle in a reasonable time and that this late settlement caused a financial loss to the insured. Furthermore, this loss must have been foreseeable and the further losses suffered must have been unavoidable. There is also a time limitation of a year applicable to these claims.
Hence, there are quite a few potential lines for defending a claim against an insurer. The act is clearly a good step forward though and while we would only ever work with insurers that treat their customers in a fair and balanced manner, the new legislation is a good step.
