Update on Insurance Act 2015 Wordings Review
The LMA has conducted a search of the Lloyd’s Wordings Repository (LWR) and has identified wordings that need reviewing in light of the Insurance Act 2015. The flagged wordings - over 300 in total - were split into classes of business and circulated to the relevant underwriting business panels in July. The panels are continuing to work through the lists of flagged wordings and to advise the LMA of those requiring amendment. We are also asking panels to put flagged wordings into priority order.
Feedback from panels is flowing steadily, and we are currently seeking external advice on a number of issues. We have referred several batches of wordings to external counsel for review and drafting advice. Initial feedback indicates a large proportion of flagged wordings are either out of date or have been superseded, and so can be archived or withdrawn. Wordings reviews will continue into 2016, as and when our reviewing business panels complete their work. The LMA is also coordinating this work with the International Underwriting Association (IUA) in respect of joint panels.
Areas where we are currently seeking counsel’s opinion or drafting advice include:
- model clauses relating to fraudulent claims and fraudulent misrepresentation
- clauses that may fall within the scope of s11 'Terms not relevant to the actual loss' (e.g. various warranties and conditions precedent)
- description of effect of breach of warranty
- description of the duty of fair presentation/disclosure requirements (including the reasonable search and definition of 'senior management')
- clause regarding critical information (e.g. warranty of truth of given representations)
- declaration regarding the fair presentation and reasonableness of the search for information
- clause clarifying application of proportionate remedies
- clause allowing the the following market to rely on disclosure/ representations made to the leader
- model language for contracting out of various sections (e.g. s10, s11, s13A and aspects of proportionate remedies)
- clause covering change in risk (prior to inception)
- framing language for warranties outside the scope of s11
- premium payment clauses
- clauses to provide for reasonable commercial limits to damages for late payment of claims (in line with Law Commission expectations regarding the operation of the new Enterprise Bill provisions which will amend the Insurance Act in due course).
These are matters under review and will not necessarily result in model clauses being added to the Lloyd's Wordings Repository (LWR).
Engaging with brokers
We are in the early stages of planning some engagement with brokers in 2016, to review some of the key issues (including policy drafting) raised by the Insurance Act 2015, and how these are being tackled. We are aware that many wordings in common usage are not published on the LWR, but belong to brokers or directly to clients, or are of unspecified ownership. It is in everyone’s interests to ensure that any wording in common usage is up to date and as clear as possible in respect of the new law being introduced by the Insurance Act, and so we are looking to work with brokers and clients as appropriate to ensure that the necessary changes are made in good time.
If you are aware of a wording which is in common usage which you would like to be considered for inclusion in the LMA model wordings review please email David Powell at firstname.lastname@example.org.
Publication of Revised Model Wordings
The LMA is aiming to publish the majority of required model wordings by the end of Q1 2016, so that a suite of up to date clauses is available for new policies and renewal leading up to the Insurance Act coming into force on 12 August 2016.
See LMA Insurance Act Guidance for guidance on when the Act will apply.