The Commercial Court recently considered the application of s.13A of the Insurance Act 2015 for the first time.
This claim was made by a policyholder (the Claimant) against its insurers (the Defendants) under a contract of marine cargo insurance. The Claimant sought an indemnity in respect of lost goods, and damages for failing to pay the claim within a reasonable time.
Section 13A applies to all policies of insurance entered into on or after 4 May 2017. It implies a term into all contracts of insurance that any sums due in respect of a claim will be paid within a 'reasonable time' (s.13A(1)).
The provision is caveated by s.13A(4) which provides that insurers will not be liable for a breach of s.13A(1) if they have ‘reasonable grounds for disputing the claim’. If this is the case, and payment is delayed, there will be no breach of s.13A(1), so long as the breach was not ‘deliberate or reckless’.
The Claimant succeeded in its claim for an indemnity, yet its claim for damages under s.13A was dismissed. Mr Justice Butcher established that a reasonable time '…was not more than about a year from the Notice of Loss'. He distinguished between grounds which are reasonable and grounds which are ultimately wrong under s.13A(4) and concluded that pursuing unnecessary investigations was not, alone, enough to render the grounds for disputing the claim unreasonable.
The judge also considered s.13A(4)(b), which focuses on the conduct of the insurer. The Defendant's unnecessary investigations were not considered a 'relevant factor', as they were already part of the 'reasonable grounds for disputing the claim'. The slow conduct of the investigations also did not constitute a breach of s.13A(1), since they occurred within a reasonable time for payment of the claim.
This judgment shows that slow or delayed investigations do not necessarily constitute unreasonableness on the part of the insurer. Additionally, it seems likely insurers will be able to rely on the proviso in s.13A(4) providing they can show that they were investigating a claim on reasonable grounds.
To read a more detailed briefing on this case, please click HERE.