The Enterprise Act 2016 amended the Insurance Act 2015 implying a term into insurance contracts entered into, renewed or varied after 4 May 2017, that insurers must pay insurance claims within a reasonable time, failing which the policyholder will be entitled to claim compensation for late payment.

There is no definition as to what a reasonable time frame might be, but the size and complexity of a claim, any statutory regulations and/or guidance and matters outside of the control of the insurer, should be taken into consideration. Ultimately it will be for a policyholder to prove a breach and that he/she suffered a foreseeable loss as a result. Insurers do not have to pay a claim whilst there is a genuine ongoing dispute regarding it, but the insurer’s conduct will be taken into consideration when it comes to be decided whether this implied term was breached.

Liability for breach can be limited by the insurer in its terms and conditions in policies with non-consumers, but such a term must be clear and drawn to the attention of the policyholder when the policy is entered into. Insurers cannot contract out of the implied term when entering into contracts with consumers.

There is a limitation period of one year from the date the payment due under the policy is made for compensation claims to be brought. If an insurer is concerned about the length of time it has taken to deal with a claim, it may be prudent for the insurer to make a settlement offer to settle any potential claim for late compensation. However, insurers should be careful to ensure the payment of any settlement of a potential compensation claim is paid separately to the insurance claim.

If you have any queries please contact Ann Grice at these offices on or at aeg@nexussolicitors.co.uk.