Addleshaw Goddard

Are you ready? The Insurance Bill and the Third Parties (Rights against Insurers) Act 2010 may soon become law

The Insurance Bill, which makes potentially significant changes to the law relating to business insurance, was introduced into Parliament by the government on 17 July 2014 as an ‘uncontroversial Law Commission Bill’. This procedure, which had previously been used for the purpose of the enactment of the Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA), is intended to reduce the time a bill takes to become law. Unexpectedly, the bill also ‘corrects a defect’ in the Third Parties (Rights against Insurers) Act 2010 so that the latter can — finally — be brought into force.

The bill is based on the draft Insurance Contracts Bill, on which the Law Commission and the Scottish Law Commission recently consulted. If it becomes law, which now seems likely, the bill will bring significant changes to the law relating to business insurance as it implements most of the recommendations made by the Law Commission.

It should be noted, however, that based on the results of an additional consultation carried out by HM Treasury, two of the key proposals originally made by the Law Commission are excluded from the bill, because the government found that they were not ‘sufficiently uncontroversial’. These are, namely, the: (i) creation of a new duty on insurers to pay damages for late payment of a valid claim; and (ii) certain rules concerning warranties (and other terms). As to the latter, they are excluded only to the extent that they are relevant to particular descriptions of the loss: the more general Law Commission proposal to reform the law of insurance warranties has been retained in the bill. The Law Commission intends to continue working with the industry to present new proposals on the two excluded points, which it hopes might be included in further legislation…

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