Our Marine Liability Policies operate subject to English law and jurisdiction. Fundamental to this are the terms and provisions of the Marine Insurance Act (MIA) 1906 which codifies English insurance contract law. In February last year the Houses of Parliament of the United Kingdom (U.K.) enacted the most significant reform to insurance contract law of the last century and as result a new Insurance Act will come into force on 12 August 2016.
While intending to strengthen the protection of all buyers of insurance, from the onset the drafters of the Act recognized a distinction between consumer and non-consumer insureds. It was equally recognised that within sophisticated insurance markets the parties could be less disposed to require the leveling provisions in the Act designed to guard the interest of consumers. Anticipating this, the Act allows insurers in the non-consumer market the freedom to contract out of some of the new provisions.
Within marine insurance, protection and indemnity is recognised as a sophisticated insurance market which allows the parties room to negotiate. Moreover, throughout the years well established practices have been developed by the market in the benefit of both the insurers and the insured. After a careful consideration of the matter, RaetsMarine is prepared to embrace certain aspects of the new Act which bring clarity to the existing law, whilst contracting out of a number of others which would put substantial tension to existing practices. It is worth mentioning that after a similar analysis this same position has been adopted by numerous competitors in the market.
Duty of fair presentation and remedies for the breach of this duty
Although sharing various features of existing duty of disclosure in the MIA 1906, the new duty of fair presentation places greater emphasis on the insurer’s role and envisages that further enquiries may be necessary after initial information has been presented by the insured. To the extent that a more professional assessment of the risk at the onset will result in the interest of both parties, RaetsMarine will adopt the duty of fair presentation.
Whereas in the MIA 1906 remedy for this breach is avoidance of the policy, the new Act introduces a fragmented remedial approach which – although in certain instances may lead to the same outcome – will now be required to ponder a number of factors (e.g. the intention of the insured) before the remedy can be established. Recognizing the importance of proper disclosure in a P&I context, RaetsMarine will contract out of the new Act’s provisions and retain the MIA 1906 remedy of avoidance.
Warranties and other terms
Existing practices allow for our insurance policies to be tailor made to the specific requirements of all our insureds. This is primarily executed through the use of conditions and warranties in the Certificates of Insurance which are individually negotiated with each client. Under existing law if the insured fails exactly to comply with any warranty in the policy, the insurer’s liability is automatically discharged from the date of the breach of warranty. Accordingly, the insured cannot avail itself of the defence that it has remedied the breach of warranty before any loss has occurred.
In the interest to safeguard the flexibility of current contracting practices with our insureds, RaetsMarine has concluded it best to contract out of the new Act’s warranties provisions and preserve remedies under the MIA 1906.
The new statutory provisions on the treatment of fraudulent claims come to provide clarity on this area of the law. For consistency’s sake, however, RaetsMarine takes the view that when a fraudulent claim is brought by a beneficiary not specifically identified in the Certificate of Insurance, the fraud should have the same impact on the main insured as if he had made the fraudulent claim. To ensure this RaetsMarine will contract out of these aspects of the new Act.
Payment of claims
The non-payment of interest on the insured’s claims has been a longstanding exclusion in our P&I policies wordings. The U.K. Parliament has sought to introduce into insurance contracts an implied term regarding reimbursement of claims. Effectively the law will require insurers to aim for reimbursement within a reasonable time - the length of which is to be determined on a case by case basis - whilst affording the insured a number of remedies in case of a breach including the payment of interests. RaetsMarine intends to contract out of these provisions.
Insurance Acts section
Under the new heading of ‘Insurance Acts’, the former Marine Insurance Act section in our marine insurance policies will be adjusted to clearly outline RaetsMarine’s position in relation to the Insurance Act 2015. A new version of our Shipowners, Charterers and Special Craft P&I policies will be issued reflecting these changes. In practice this will bring minimal disruption to our daily activities as our policy terms continue to respond after August 12 as effectively as up to now.
Whereas contracting out remains an alternative for insurers dealing with ‘non consumer’ insureds, contracting out of when dealing with ‘consumer’ policies is not permissible under the new Act. Being that many insureds in our book of business for Yacht P&I and Fishing Vessel P&I potentially qualify as consumers under the Act, RaetsMarine has decided for these policies to apply the Act in full.