Disputes relating to insurance claims are increasingly common, and, for individuals and businesses, contesting a situation where an insurer will not pay out or offers a sum lower than the loss suffered can be daunting, as insurers have the financial resources to dispute or delay any claim.
One of the most effective ways to deal with an insurance dispute is to avoid it in the first place.
Many businesses as well as individuals assume that just by taking out expensive insurance, they are adequately protected and don’t need to worry.
However, issues can arise as to the real extent of the cover in an insurance policy and also the interpretation of technical legal language which will be heavily slanted in favour of the insurer.
In short, it is advisable to make sure you are fully briefed on an important insurance policy and remember also that a technical failure or breach by you as insured can result in your insurers having the legal right to cancel the contract and/or not pay out, either in part or full.
If you need advice or feel that your negotiating position with your insurers will be stronger if you have lawyers behind you, do get in touch with us.
There are good and understandable reasons for insurers requiring full disclosure of relevant information before deciding on coverage or premium based on risk. The problem, from the perspective of then insured however, is that the concept of full disclosure and utmost good faith is somewhat unclear. Difficulties can also arise with ongoing obligations to provide information about any circumstance changes, which can be genuinely overlooked by an insured.
There is a lot of case law on the legal tests for what is utmost good faith but for the purposes of this initial guide, the general position on most of these cases is not in favour of you as insured and this is over and above the problem of taking on a dispute against insurers who have almost limitless resources.
The solution to the above may be to hedge some of your risk, just like insurers do – protect yourself by taking professional advice if you are in any doubt about your duty or ensure that your brokers are asked to advise you and alert you to review your policies.
Insurance brokers are often retained to advise what insurance may be good for your business but brokers are also salespeople. This can create a conflict of interest situation and whilst brokers are very familiar with risks and will generally advise about the duty of full disclosure and utmost good faith, they are not lawyers or legally trained.
On the other hand, on the face if it, your insurance brokers perhaps do have a duty to advise on the terms of your policy and the obligations on you as insured, over and above the general need to act in good faith. By asking the brokers for clarification they may take on advisory burdens.
In short, it is at least worth considering whether it is better to raise an issue with your brokers who will have professional indemnity cover and especially in high value or technical insurance contracts rather than have a dispute with your insurers if they refuse to pay out or challenge a claim by you.
Insurance policies are very carefully drafted by high end lawyers and it’s therefore essential to understand what a policy of any kind does not cover as well as what it does. Never underestimate also the risk of insurers refusing to pay out fully on a policy or even seeking to avoid paying based on a technicality.
There may even be good reasons to take legal advice before agreeing to an insurance policy which can carry a high premium and yet not adequately cover you or your business in the way you think. Insurance disputes are common and whilst we can advise you on any such dispute, you are far better off taking advice before agreeing a policy, especially since insurers will definitely have the resources to defend any court claim against them and this kind of litigation is therefore perhaps even more risky than other types of contract dispute.
Remember contractual loss principles
Insurance disputes can also relate to where an insurer accepts liability for a claim but challenges the value of that claim. Difficult issues can arise as to what constitutes foreseeable or consequential losses and on areas such as replacing new for old or like for like.
Court claims – what are the options?
If you need advice on insurance policies or an insurance dispute get in touch with David Rosen.