Legal Focus: Insurance Act 2015 – five years on

On August 12, 2016, the UK's Insurance Act 2015 came into force. Exactly one week ago, the Act celebrated its fifth birthday, but what difference, if any, has it made to the judicial landscape and where are we now, five years on?

Before its enactment, the 2015 Act was considered to be the most significant reform of English insurance law since the Marine Insurance Act of 1906. While this now seemingly archaic piece of legislation was, strictly speaking, only relevant to marine insurance, most of its provisions were applied to non-marine insurance on the basis that the 1906 Act embodied many principles of the common law.

However, through the early 20th century, the 1906 Act's provisions slowly but surely fell out of line with best practice in the modern insurance market, failing to keep up with both legal and commercial developments in other jurisdictions.

Indeed, when one considers some of the radical changes that the 2015 Act introduced (including, for example, the treatment of warranty breaches), you would be forgiven for predicting this would cause a huge upsurge in coverage disputes, as insureds and insurers grappled with the new legislation. While the Law Commission provided guidance on the practical operation of the more ambiguous provisions, for some, this only sought to muddy the waters further.

Surely, therefore, the landscape was rife for a torrent of insurance disputes that would clog up the Commercial Court for many years? It seems not.

Limited cases

Even when one looks at the very limited number of cases which have been decided in the past five years and which cite the 2015 Act, many of these citations are made in passing. For example, in the multiparty litigation Natixis S.A v Marex Financial, Access World Logistics (Singapore) Pte Ltd & MCAP (a Lloyd's Syndicate) [2019], a cross claim between two co-defendants had raised several issues concerning the Duty of Fair Presentation under the 2015 Act (which, before that, had not been considered by a court).

However, on the day MCAP's underwriters were called to give their oral evidence, it reached a confidential settlement with Marex and the part of the proceedings that would have brought the 2015 Act into focus fell away.

The following year, the Scottish Court of Session (Inner House, First Division) heard an appeal in the case of Young v Royal Sun Alliance Insurance PLC [2020]. Here, the defendant insurer had avoided the relevant policy following notification of a claim for fire damage to commercial premises.

At the time of taking out the insurance, the insured had failed to disclose that he had been a director of four companies which had either been dissolved following an insolvent liquidation or had been placed in insolvent liquidation in the five years prior to inception of the policy. The defendant insurer argued that this constituted a breach of the duty of fair presentation, which gave rise to the right to avoid.

In response, the insured argued that the insurer had impliedly waived its right to the disclosure of this information pursuant to s3(5)(e) of the 2015 Act.

The insured contended that an email sent by the insurer which sought information about the insured's personal bankruptcy/solvency position, demonstrated that the insurer was not concerned with the insured's wider experience of insolvency.

Had it been concerned, the insured argued that further enquiries should have been made and in the absence of the same, the insurer's right to the undisclosed information had been impliedly waived.

The court found that a reasonable reader of the insurer's email would not have understood it to contain an enquiry which was to be construed as an expression of limited concern vis-à-vis the insured's past experience of insolvency. It therefore followed that there had been no waiver under s5(3)(e) of the 2015 Act and the insurer was entitled to avoid the policy.

Although the insured's argument was certainly a novel one, the crux of this dispute was one of factual evidence, rather than the interpretation and application of the Act's provisions. Indeed, it was agreed between the parties that the insured was required to make a fair presentation of the risk and an insurer could impliedly waive an insured's duty to disclose certain information. Notwithstanding the fact that the ability to waive had not been codified under the old legal regime, it may be a stretch to hold Young out as a landmark decision arising from the 2015 Act.

Most recently, the Commercial Court heard an application in Kjaergaard v MS Amlin Insurance SE [2021]. Here, the insured had sought summary judgment in a claim for a declaration that he was entitled to be indemnified under the terms of an all-risks policy, having sustained water damage to his yacht.

The insurer had avoided the policy on the grounds of material non-disclosure and misrepresentation relating to the insured's claims history (namely, a breach of the duty of fair presentation). Of note, the policy itself had been written by a coverholder acting on behalf of the insurer, who was brought into the proceedings as a Part 20 defendant.

The insured argued that as a result of the coverholder arrangement, the defendant insurer had no real prospect of showing that any misrepresentation or non-disclosure had induced it into entering the policy. While the insurer accepted that inducement was a requirement under the 2015 Act, it pointed out that, had the insured not misrepresented its claims history, the coverholder would have been required to refer the risk back to the insurer under the terms of the coverholder agreement. In those circumstances, the insurer would have rejected it.

Again, this dispute did not truly concern the interpretation and application of the Act's provisions. Moreover, when running a non-disclosure argument, the requirement of inducement was of course a pre-existing component under the old legal regime, in any event.

It is interesting to see that in those few rare instances the 2015 Act has, to some degree, been considered by the courts during the last five years, the issues in dispute have all been loosely concerned with the duty of fair presentation. Regardless as to whether or not this is just a coincidence, one cannot escape the fact that there is a notably absent body of new caselaw; the case law that many were certain would materialise once the Act came into force.

It may well be that disputes between insurers and their insureds are now settling outside the courts' doors, or indeed, insurers are generally treading much more carefully in the wake of the reformed pro-insured regime.

One thing is almost certain though: we are going to have to wait a bit longer before the new judicial landscape really does begin to take shape.