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CILA SPECIAL INTEREST GROUP CONFERENCE. Tuesday 23 rd September 2008 “Recent legal developments affecting the insurance industry”. Richard Evans Partner Beachcroft LLP 30 Eastcheap London EC3M 1HD. RESERVATION OF RIGHTS. Why? Waiver, affirmation, election

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CILA SPECIAL INTEREST GROUP CONFERENCE

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Cila special interest group conference

CILA SPECIAL INTEREST GROUP CONFERENCE

Tuesday 23rd September 2008

“Recent legal developments affecting the insurance industry”

Richard Evans

Partner

Beachcroft LLP

30 Eastcheap

London EC3M 1HD


Reservation of rights

RESERVATION OF RIGHTS

  • Why?

    • Waiver, affirmation, election

  • Kosmar Villa Holidays v Syndicate 1243

    • 1st instance (Mr Justice Gross – 2007)

    • Court of Appeal [2008] WLR (D) 71


Per rix l j in kosmar

Per Rix L.J in Kosmar

“It would not be good practice for insurers to rush to

repudiate a claim for late notification, or even to

destabilise their relationship with their insured by

immediately reserving their position – at a time when they

were in any event asking pertinent questions about a

claim arising out of an occurrence about which they had

long been ignorant in absence of prompt notification”


Airmic initiative

AIRMIC INITIATIVE

  • Survey June 2008 – 29% say experience of reservation of rights having been used inappropriately.

  • Voluntary agreement proposed whereby 90 day moratorium between notification of claim and any reservation of rights.

  • Detailed wording of agreement expected by end of the summer.


Law commission review of insurance contract law

LAW COMMISSION REVIEW OF INSURANCE CONTRACT LAW

  • Jan 2006 Scoping Paper

  • Sep 20061st Issues Paper on Non Disclosure and Misrepresentation

  • Nov 20062nd Issues Paper on Warranties

  • March 20073rd Issues Paper on Intermediaries and Pre Contract Information

  • July 20071st Consultation Paper

  • Feb 2008Issues Paper on Insurable Interest

  • May 2008Summary of responses to Consultation Paper


Timetable going forward

Timetable Going Forward

  • Autumn/Winter 2008 anticipated issues paper on post contractual good faith, damages for late payment.

  • 2009Second Consultation Process

  • Summer 2009Bill for reforming consumers insurance law

  • 2010/2011? Bill to reform remaining areas covered by Issues/Consultation Papers


Summary of key law commission proposals to date

SUMMARY OF KEY LAW COMMISSION PROPOSALS TO DATE

  • Where Insured is consumer follow FOS approach

    • non-disclosure replaced by need for insurer to ask question

    • for misrepresentation “reasonable insured” test to replace “prudent insurer”

    • basis of contract clauses to be outlawed

    • remedy of “proportionality”


Damages for late payment

DAMAGES FOR LATE PAYMENT

  • Law Commission likely to propose reform to bring insurance contracts more in line with insurance contracts.

  • To what extent have Ventouris v Mountain (1993) and Sprung v Royal Insurance been affected already by the recent decision in Sempra Metal v IRC (2007).


Electronic disclosure

ELECTRONIC DISCLOSURE

  • 36 billion emails are sent daily on a world wide basis (rising 20% each year).

  • 93% information held in digital format (70% never printed).

  • From March 2009 new FSA regulations regarding the recording and storing of telephone conversations and electronic communications relating to client orders come into effect.

  • April 2009 – Proposed Technology Questionnaire in Litigation.


Civil procedural rules define documents to include

Civil Procedural Rules define “documents” to include

  • “email and other electronic communications…”

  • “stored on server and back up systems and electronic documents that have been deleted”

  • “metadata”

    See Micro Design Group v Norwich Union (2005)


Causation

CAUSATION

  • Policy cover

  • Recovery prospects

  • What evidence/standard of proof is required


Drake v harbour 2008 ewca civ 28 court of appeal

Drake v Harbour [2008] EWCA Civ 28 (Court of Appeal)

  • Sufficient even if cannot establish precise mechanism if cause was of a kind attributable to the defendant’s negligence.


Lexus financial services t a toyota financial services v sandra russell 2008 ewca civ 424

Lexus Financial Services t/a Toyota Financial Services v Sandra Russell [2008] EWCA Civ 424

  • 3 possible causes

    • Arson

    • Defect in wiring in Defendant’s garage

    • Defect in car electrics

  • Held by Court of Appeal that judge was entitled to conclude on the evidence that the probable cause was the defect in the electrics.


Bailment

BAILMENT

WHAT IS BAILMENT?

  • Voluntary taking into custody of goods which are the property of another.

  • With or without reward to the bailee.

  • Bailee only takes possession of the property not ownership of it.

  • Bailor reclaims ownership.


North british mercantile insurance co v the london liverpool globe insurance co 1877

NORTH BRITISH MERCANTILE INSURANCE CO V THE LONDON LIVERPOOL & GLOBE INSURANCE CO (1877)

  • B&Co paid in full by LLG and they paid R&Co.

  • LLG wanted a contribution from North British but court held otherwise “double insurance only where same property insured AND interests are the same…contribution exists where the thing is done by the same person against the same loss…B cannot say to R somebody else has been insuring the goods you go and sue that somebody else.”

B&Co

R&Co

Stored grain owned by

“Wharfingers policy”

With LLG

Merchant Policy

(North British)


Ramco ltd resource industries ltd v weller russell laws insurance brokers ltd 2008 ltl 17 6 2008

Ramco Ltd & Resource Industries Ltd v Weller Russell & Laws Insurance Brokers Ltd (2008) LTL 17/6/2008

RAMCO trade in army surplus stock

Holds stock for

MOD

If R liable for loss then market value calculation

If not liable then R had to pay 2 % base price for stock

Murray

  • R merely obliged to insure for £2million


Cila special interest group conference

POLICY WORDING IN RAMCO COVERED:

“stock…the property of the Insured or held by the Insured in trust for which the Insured is responsible”

  • North British & Mercantile Insurance Co v Moffatt (1871)

    • seller retained possession but no longer owner. As they were not responsible for them no cover.

  • Hepburn v Tomlinson (Hauliers) Ltd (1966)

    • wording “property of the Insured or held by them in trust or on commission” would have given cover.

      But, beware the loophole provided by Lord Justice Waller In Ramco.

    • does failure to arrange full cover create a “responsibility”?


Cila special interest group conference

BEACHCROFT LLP

Sponsorship of CILA Property Special Interest Group

Case law updates on CILA website at www.cila.co.uk


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