Chapter 8

Question 1

What is a challenge for the claims team?

Answer 1

Fraudulent claims (detection and avoiding paying out)

Question 2

What is the controlling principle for claims?

Answer 2

Indemnity -putting the insured back to the financial position they were in prior to the loss

Question 3

What are exceptions to privy of contract (only the person who made the policy can claim under an insurance policy)

Answer 3

Assignment
Agency
Trusts

Statutory exclusions:
Road Traffic act -
Third Parties Act 2010
Law of Property Act 1925
Fires Prevention Act 1774

The Contract Act 1999 - a third party can claim if:
The contract provides they may do so

The contract purports to confer a benefit to the third party

But these needs to be intended by the policy

Question 4

Third party claim under the road traffic Act 1988

Answer 4

If no insurance a direct claim to Motor insurer bureau.

Otherwise, named drivers and others are able to drive the car, the victim of a road traffic accident can make a direct claim to the insurer

Question 5

Third Parties Act 2010 - right to a third party claim under an insurance policy?

Answer 5

money payable under the liability of an insolvent party is added to their list of assets.

Therefore if there is large debt to total assets, the accident victim may only receive a proportion of there claim.

Question 6

Law of Property Act 1925 - third party right to claim under an insurance policy?

Answer 6

The benefit of insurance effected by vendor of real estate is automatically assigned to the purchaser.

Therefore any insurance money received by the seller must be paid to the buyer on completion.

Question 7

Fires Prevention Act 1774 - third party rights to claim?

Answer 7

A person who has a legal or equitable interest in buildings (lessee, mortgagee etc) to compel the owner of the insurance to reinstate the building if it is damaged or destroyed in a fire.

Question 8

What does an insured need to do regarding a claim?

Answer 8

Give notice of a loss and often give notice of an incident which may arise to a claim

Question 9

Do the Insured have a time limit for notification of a loss?

Answer 9

There can be a time limit and if the insured fails to comply the insurer may, if a conduction precedent to liability, have the right to deny liability for the loss.

For compulsory classes, insurers cannot deny based on this breach

Question 10

Where does the burden of proof lie for coverage of loss?

Answer 10

The insured to prove the loss was by a covered peril and also the amount of loss.

Question 11

To Discharge the burden of proof, what must the insured establish?

Answer 11

The loss was caused by an insured peril

The amount of his loss

Question 12

What are the ICOBS rules for handling claims?

Answer 12

• Handle claims promptly and fairly
• Provide reasonable guidance to help a policy holder make a claim and appropriate information for progress
  -not unreasonably reject a claim
• settle claims promptly once settlement has been agreed

Question 13

Damages for late payments for an insurer?

Answer 13

Originally this was just interest

BUT, it is the insurer breaking their contract,

The Enterprise Act 2016 allows the court to award damages for late payment where the insurer has acted unreasonably

Question 14

What are the problems faced with Causation?

Answer 14

• it can be difficult to separate the effects of a peril which is insured vs one which is excluded.

The operation of an insured peril may result in other forms of damage (Water to put out the fire)

Doctrine of proximate cause is codifies in the Marine Insurance Act 1906

Question 15

An all risk policy, when are things excluded?

Answer 15

If specifically mentioned otherwise automatically included.

Question 16

Where does the burden of proof lie on what caused the loss

Answer 16

The assured

Question 17

Leading authority for proximity of cause

Answer 17

House of Lords decision

Leyland shipping v Norwich Union fire
Ship damaged by a torpedo then sank due to a storm.

Torpedo is uninsured peril (war) but sinking is a peril of the sea

Question 18

What’s a concurrent interdependent cause?

Answer 18

More than one event causes the loss and they are 50%\50% responsible

If one is insured and the other isn’t, the insured prevails

Question 19

The burden of proof for named peril vs all risk

Answer 19

Named - the insured
All risk - no burden of proof required

Question 20

Efforts to avoid or reduce loss

Answer 20

Insurance policies usually require the insured to take reasonable precautions to avoid loss or damage. Damage to the subject matter insured should be distinguished from costs incurred by the insured to prevent or minimise an insured loss

Question 21

Are you allowed to claim prevention costs?

Answer 21

No the English courts have refused to allow recovery for mere prevention costs unless the policy says otherwise.

Marine insurance policies usually contain a sue and labour clause which entitles the insured to claim expenses incurred to prevent or minimise the losses

Question 22

What are the four types of fraud involved in claims?

Answer 22

Falsification of a loss
Deliberate loss
Exaggeration of a loss
Lying about the circumstances of a genuine loss

Question 23

Requirements to establish fraud

Answer 23

It’s a criminal act and we have prove the case beyond a reasonable doubt

Question 24

Remedies for insurers

Answer 24

Insures is not liable to pay the claim

Question 25

When making a claim what two things must the insured prove for the insurers to be liable?

Answer 25

Caused by an insured peril

Amount of the loss

Question 26

What degree of proof applies in the case of an insurance claim with regards to what caused the loss?

Answer 26

Proof on the balance of probabilities

Question 27

Do insurance policies cover losses caused by negligence?

Answer 27

Generally yes even if precautions unless deliberate or reckless

Question 28

In the context of proximate cause what is an uninsured peril

Answer 28

A peril not specifically insured or excluded by a policy covering named perils only

Question 29

What is a remote cause

Answer 29

A cause which plays only a small part in bringing the loss

Question 30

What was the impact of versloot dredging decision

Answer 30

Harder for insurers to use the fraudulent device defence - claim is no longer forfeited If genuine and exaggerated. Instead the insurer has to prove the lie is relevant

Question 31

If an insured is found to have committed a fraud during a claim what action can the insurer take with respect to the insured policy, the claim and any other claim they have made

Answer 31

S12 of IA2015
Refuse to pay the claim
Recover any sums paid
Treat the contract as terminated from the fraudulent act
Can refuse any claim after but not before
Does not need to return the premium