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From the Protect Duty to damages for late payment, we offer our international experts’ predictions on the opportunities and challenges that the property insurance market may face in the coming year and beyond.

Property predictions
#1 It’s not over yet: unresolved COVID-19 business interruption issues remain for insurers in 2023

We anticipate further cases dealing with other aspects of causation and aggregation will now be litigated in the wake of the Stonegate, Various Eateries and Greggs trilogy. These decisions brought some clarity to the insurance market on aggregating occurrences, causation and how furlough is to be treated going forward. Aside from the almost inevitable appeals on these issues, unresolved issues remain, including over coverage for venues which never had to close and issues arising out of loss of income for reasons other than inability to trade. Insurers will also have to deal with questions in relation to quantum arising from deaths, long COVID and other causes which might extend the cover available for insureds. A series of litigated claims that will address coverage under various ‘at the premises’ disease clauses are also due to be heard in 2023. It also remains to be seen whether policyholders will try to unravel any of the Divisional Court’s findings on those prevention of access clauses left unaffected by the Supreme Court judgment in the FCA test case.

#2 Damages for late payment will feature in outstanding COVID-19 claims

We expect to see further claims for damages for late payment under s13A Insurance Act 2015 over the next year. As more COVID-19 business interruption issues are resolved, there will be fresh opportunities to seek further judicial guidance. Following the first reported decision on the issue in Quadra Commodities v XL in March 2022, there is some feel for how the courts will assess what amounts to a reasonable time to pay an insurance claim. However, in handling any such claim, it is important to draw a distinction between what amounts to a reasonable time to investigate the claim(so that the implied term is not breached in the first place) and whether there is a defence to any otherwise obvious breach because there were reasonable grounds for disputing the validity of the claim. The onus is on the insured for the first and on the insurer for the second. It is also worth noting that, in relation to the former, business interruption cases were expressly raised in the explanatory notes to the 2015 Act as a category of insurance which takes longer to value. In relation to both parts, insurers must make sure that they document their actions carefully and keep policyholders well informed throughout the claims journey. Claims handling remains key to insurers’ reputation. Both insurers and their service providers must show it is at the heart of their business model.

#3 The Protect Duty will become the focus of cross sector attention as a key social and governance issue

The Protect Duty was included in the Queen’s Speech in May 2022. There will be significant implications for businesses and the insurance industry arising out of this proposed new duty to protect the public from terrorist attacks at publicly accessible locations. Underwriters will need to understand the new exposures for businesses, particularly those in the retail and entertainment sectors. Brokers will need to be more aware of terrorism risk generally and reinsurers will be interested in the accumulation of risk. Responses may include increased premiums, policy drafting which restricts or excludes cover and a review of indemnity limits. Improvements made to security are however likely to have wider benefits, potentially preventing other crime and antisocial behaviour, thereby reducing insurers’ overall exposure.

#4 Winter is coming: cost of living crisis will increase household fire risks

An increase in household fires is anticipated following the change in home heating habits to cheaper options in response to the cost of living crisis and soaring energy bills. Fire and rescue services throughout the UK have launched campaigns to warn on safety hazards and the risk of house fires when using portable heaters, wood burners and open fires. Property damage insurers have also reported on the potential for candles to increase house fires. It will also be interesting to see whether reduced heating and blocking ventilation in homes results in an increase in damp and mould problems, which may damage the fabric of buildings as well as posing a health hazard.

#5 Third Parties (Rights against Insurers) Act 2010 decision will generate savings for insurers

The recent decision in Rashid v Direct Savings Limited on the scope of the Third Parties (Rights against Insurers) Act 2010 will offer comfort for insurers in the coming year. The 2010 Act allows claimants to pursue a single action against insurers dealing with both policy coverage and the policyholder’s underlying liability to a third party, unlike the previous 1930 Act. In Rashid, it was decided that the limitation period for starting a claim against an insurer is not suspended upon the insolvency of the policyholder. This is in marked contrast to 1930 Act claims where limitation was effectively suspended upon the insolvency of a policyholder, exposing insurers to long-tail liabilities. While Rashid is a County Court decision, it is consistent with other unreported judgments decided along the same lines. This decision is extremely welcome for insurers, providing certainty on when a claim becomes time-barred, which offers a complete defence to a claim under the 2010 Act. In light of this decision, insurers may wish to review their databases for claims which may be able to be closed.

#6 COP27 deal on loss and damage opens up a new front on climate change response

The inevitable last-ditch compromises as COP27 concluded contained one significant step forward in the world’s response to climate change: the agreement to create a fund to recompense ‘vulnerable’ countries for the loss and damage caused by global warming. This was seen as a breakthrough by developing countries and those most under threat from rising ocean levels and dramatically changing weather patterns. There is a long way to go before the fund becomes a reality, however. There will be tricky negotiations around who qualifies for help and who contributes before the fund becomes a reality. This is likely to be hammered out next year at COP28 in the United Arab Emirates.

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