The Insurance Act 10 Years On – has anything changed?

Panel discussion at the Old Library, Lloyds on Tuesday 11 March 2025

On 11 March 2025, 7KBW and the LMA hosted a panel discussion at Lloyds to mark the 10th anniversary of the Insurance Act 2015. Lord Mance moderated the discussion, which covered a range of topics relating to the Act and its interpretation by the Courts to date. The speakers on the panel were David Hertzell (Mactavish), Harry Wright (7KBW), Josephine Higgs KC (7KBW) and Arabella Ramage (LMA).

1. Purpose of the Act

David Hertzell was responsible for the Law Commission’s work on insurance law reform in his former role as Law Commissioner. Drawing on this experience, David kicked off discussions with an overview of the intentions behind the Act.

The key purpose of the Act was to modernise insurance law to reflect the significant changes in society since the Marine Insurance Act 1906 was drafted at the end of the 19th century. Non-marine insurance classes now formed a larger part of the market than marine classes, and the advent of IT in the 1980s had transformed the information balance in the market.

The Act was the result of extensive consultations over a period of eight years. The drafting of the Act was ultimately driven by a few underlying principles:

• First, the Act is a default regime that parties can contract out of. This allows it to accommodate businesses of all different sizes and types.
• Second, the Act was prepared on a principles-basis. It was not intended to cover every situation. If there were gaps, the courts were expected to step in and fill them.
• Third, it was not appropriate to dictate to a highly successful market how the law should affect and run their businesses. The legislation therefore incorporated what the Commission was told were industry best practices. Some of the wording from the Marine Insurance Act was maintained where it already meant something important in the market.

2. Duty of fair presentation

Harry Wright of 7KBW addressed the duty of fair presentation and issues regarding the knowledge of the insured.

The insured’s knowledge matters to the duty of fair presentation because the insured has to disclose what it knows. Before the 2015 Act, the insured was deemed to know every circumstance which, in the ordinary course of business, ought to be known by him. The old law (sections 18 and 19 of the Marine Insurance Act) took into account how an insured actually ran its business – including if it did so in an inefficient way.

He noted that the position under the 2015 Act may well be different. Section 4 of the Act identifies three tests of insured’s knowledge.

1. The insured will know what is actually known to its “senior management”. In The WIN WIN [2024 EWHC 719 (Comm), Dias J noted that, although senior management usually includes board members, it is always a question of substance, not titles.
2. The insured knows what is known to those responsible for its insurance. That will include the broker and those within the insured’s organisation who look after the insurance.
3. The insured will know “what should reasonably have been revealed by a reasonable search of information available to the insured”. However, the search for these purposes must be reasonable, so the court cannot take into account the fact that the insured happens to run its business inefficiently.

Harry concluded that the requirement of “reasonable search” – a potentially real change introduced by the Act – likely makes the insured’s knowledge and duty to disclose more rigorous. However, section 4 has not been subject to any serious judicial consideration.

3. Remedies for breach of the duty of fair presentation

Josephine Higgs KC of 7KBW then addressed the remedies for breach of the duty of fair presentation.

Josephine explained that, prior to the Act, the only remedy afforded to an insurer for breach of the pre-contractual duty of good faith by the insured was avoidance of the policy ab initio. This ‘all or nothing’ remedy had for years been criticised as being inflexible and potentially harsh to insureds.

The Act maintained the requirement for the insurer to demonstrate ‘inducement’. But the Act significantly changed the remedies for a qualifying breach. Remedies are set out in Schedule 1 of the Act:

• Avoidance is now only available where either (i) the breach is deliberate or reckless or (ii) but for the breach, the insurer would not have entered into the contract at all.
• Where the insurer would have applied different terms, those terms are treated as applying to the policy.
• Where the insurer would have charged a higher premium, the insurer can reduce proportionately the amount to be paid on a claim.

Josephine noted that only a small number of cases concerning the duty of fair presentation have come before the courts to date:

• The first was the Scottish case of Young v Royal Sun Alliance [2020] CSIH 25. It was held that the insurer had not waived its right to disclosure of a director’s insolvency history and was entitled to avoid the policy.
• The first English case was Berkshire Assets (West London) ltd v Axa Insurance Co [2021] EWHC 2679 (Comm). The insured failed to disclose that a director of one of the insured entities was the subject of criminal charges. The Court held that the insurer was entitled to treat the policy as not covering that entity.
• The two subsequent cases are both from 2024. In Tynefield v The New India Assurance Company [2024] 5 WLUK 700, the insurer pointed to underwriting guidelines to establish that its strict policy was to refuse or cancel cover for insureds whose directors had an insolvency history. The insurer was accordingly entitled to avoid for the insured’s non-disclosure.
• Lastly, in Delos Shipholding v Allianz [2024] EWHC 719 (Comm) Mrs Justice Dias found that the insured did not have actual or constructive knowledge of the material circumstances. She also concluded (in obiter) that, had proper disclosure been made: the insurer would have required the nominee director to be replaced as a pre-condition to cover; and the insured would have complied with that condition, such it would be entitled to cover. The insurer’s appeal on non-disclosure issues is due to be heard in July this year.

Josephine concluded her presentation with three points of advice:

• For brokers: the recent case law establishes that the fact a director has faced criminal charges or has an insolvency history generally will be material circumstances that the insured is required to disclose. This should be made very clear to insureds.
• For insurers: contemporaneous underwriting rules, guidelines or manuals will be helpful in showing what the underwriter would have done if proper disclosure had been made.
• For everyone: watch out for the Court of Appeal’s decision in Delos later this year, which will be the first appellate decision in England in this area.

4. Warranties and terms not relevant to the actual loss

Christopher Foster’s presentation focussed on warranties and terms not relevant to the actual loss.

A warranty is a promise or agreement by the insured that a state of affairs exists or will exist. Before the enactment of the 2015 Act, a breach of warranty had serious consequences – the insurance could be voided from the moment of the breach. Three changes introduced by the 2015 Act are noteworthy. First, the insurance contract is not automatically voided where a warranty is breached. Second, the basis clauses, which convert pre-contractual representations into warranties, are abolished. Third, a breach of warranties merely suspends, not removes, the cover. In other words, when the breach of a warranty is remedied, the cover is restored.

Mr. Foster also drew attention to two important cases that considered the treatment of warranties under the 2015 Act.

• Mok Petro Energy FZC v Argo (No 604) Ltd and others [2024] EWHC 1935: Dias J held that the insurer need not show that the breach of a warranty, in fact, caused the loss. Instead, the insurer only needs to demonstrate that compliance with the warranty is capable of reducing the risk of such loss.
• Lonham Group Limited v Scotbeef Limited & DS Storage Limited (in liquidation) [2025] EWCA Civ 203: the decision of the Court of Appeal is an important guidance in instances where parties seek to get around the statutory provisions on warranties by describing the term as something other than warranties (for example, conditions precedent).

5. Damages for late payment

Arabella Ramage spoke about section 13A of the Act, which implies into every insurance contract a term requiring the insurer to pay any sums due in respect of a claim within a reasonable time.

Arabella noted that section 13A was inserted into the Act in 2016 after other jurisdictions had started to introduce a requirement that insurers make payment within a reasonable time. But it was unclear whether there was evidence that insurers were actually being slow to pay.

Arabella recalled that the Law Commission’s view was that insurers needed to be allowed a reasonable time to investigate losses, and that it was important to the long-term stability of the insurance market that insurers are adequately incentivised to investigate and root out fraudulent and invalid claims. There were others who wanted to incentivise insurers to pay out fast and to give insureds legal rights to enforce prompt payment. Many people were concerned that section 13A would lead to insureds claiming damages as a matter of course, similar to the way in which bad faith is pleaded in the US.

In fact, there has only been one case under this section, Quadra Commodities SA v XL Insurance Co SE [2023] EWCA Civ 432, which was decided in favour of insurers.

It is possible that claims are being paid faster, but no evidence has been produced. For insurers, there has been more significant downside than expected. Although there have been no judgments against insurers, a claim for late payment is sprinkled into most claims that come to insurers, and time and money is spent dealing with that aspect of claim.

Arabella observed that, going forward, it might be sensible for insureds to separate claims for late payment from the case against the insurer on liability: then, only if the insurer loses the case should does any money need to be spent on a section 13A claim.

6. Conclusions: has the Act lived up to hopes and expectations?

David Hertzell noted that there has been very little authority on the 2015 Act. At the time of its enactment, it was expected that certain provisions of the Act were likely to produce much more litigation. A few examples include the meaning of “senior management”, “reasonable search”, and “reasonable time to pay”. He also noted that the introduction of proportional remedies under the Act played an important role. As a result of their introduction, classic arguments around misrepresentation and non-disclosure are far fewer. David concluded that, although the 2015 Act appears to have worked well so far, ten years may be too soon to tell.

Written by Alice Osman and Aradhya Sethiya, pupil barristers.