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New law: Businesses can claim damages for insurers' unreasonable delay in paying out on insurance claims

Businesses and individuals taking out insurance policies after 4 May 2017 can claim damages if their insurer does not pay sums due under a claim within a reasonable time.

Legal Alert

This update was published in Legal Alert - June 2017

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

The new law only applies to insurance and re-insurance contracts entered into on or before 4 May 2017. You will need to prove that:

  • You incurred actual loss
  • The loss was foreseeable at the time you entered into the contract
  • Your loss was caused by the failure to pay
  • You have taken reasonable steps to mitigate your loss

What amounts to a 'reasonable time' depends on, for example, the type of insurance, the size and complexity of the claim, the insurer's need to comply with any relevant strategy or regulatory rules or guidance, and factors outside the insurer's control.

Your insurer can withhold payment if there are reasonable grounds for disputing the claim, but the court will take into account how the insurer conducts the claim.

Insurers can exclude the new law (unless their breach is deliberate or reckless) in their policies if the insured is a business (but not if they are a consumer), and provided the exclusion is 'transparent' (as defined in insurance law). There is no indication whether exclusions will become common practice yet.

Operative date

  • Now


  • Businesses taking out insurance should check their insurers have not excluded their right to damages in new insurance contracts

Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.