Saturday, 17 November 2018


 Authored by: Joshua Charalambous, Steven Aitken

Key legal issues

The keys to managing insured risks are to: 1) understand the risk itself and implement risk management strategies; 2) understand the insurance policy and what is covered; and 3) understand the duties of the parties involved (ie the insured, the broker and the insurer).

There are a broad range of legal issues that arise in the context of insurance but, most commonly, legal issues arise in relation to coverage. Once circumstances arise (or a claim is made), notification should be made by the Insured to the Insurers (often this is via the broker but it is important to check the policy for the notification requirements). Insurers will then review the factual matrix and check whether it falls to be covered by the policy.

The most common cause of coverage declinature is that the facts do not fall within the scope of the risk that Insurers agreed to indemnify. This might be because the facts lend themselves to be covered by a different type of policy or simply because the risks were not fully considered before agreeing the policy.

Another key issue relates to notification of circumstances. Many policies require, as a condition precedent to indemnification, notification within a certain specified time frame. The time often (although not always) starts running from when the Insured has knowledge of circumstances that could give rise to a claim (even if a claim has not yet been made).

Once cover is confirmed, the Insured and Insurers will work together to appoint solicitors to act for them both. In some policies, the Insured is able to select its preferred solicitors and Insurers will reimburse reasonably incurred costs. In other policies, Insurers reserve the right to use their panel of solicitors. This often depends on the type of policy and the amount of premium paid. It is useful to use solicitors that are experienced in acting for Insurers and Insureds together, to ensure that all parties are swimming in the same direction.

The laws governing insurance policies are complicated and in the process of change through the Insurance Act 2015. The new legislation came into force on 12 August 2016 and will represent the biggest change to insurance contract law in over 100 years (note that it does not affect this article). The changes ought to be communicated to insureds by the brokers, and the details will not be explored here, but those who are interested in watching a brief overview can click here.

This piece is intended to give readers an overview of the types of risks and policies rather than an in-depth review of insurance law. That said, if you have any questions on the legal backdrop and its change, you should seek legal advice.

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