An insurer deny a claim is a refusal by an insurer to indemnify an insured under the terms of an insurance contract.
Firstly, what forms an insurance contract? It is formed from three types of documents:
- The Insurance Schedule
- The Insurance Policy Wording
- Any Endorsement
So, all of these must be read together to understand the terms of an insurance contract. Therefore, there are many terms in a contract of insurance that may be applied by an insurer for the purpose of refusing to indemnify an insured. Against popular belief of many insureds, this does not mean that insurers claim departments spend their time scrawling through insurance contracts to find a reason not to indemnify a client! Just to be clear for readers of this article, by indemnify we mean not to defend an insured and/or not to pay out on a claim.
TODAY WE ARE LOOKING AT CONDITION PRECEDENTS AND THE CONSEQUENCE OF FAILURE OF AN INSURED TO COMPLY WITH A CONDITION PRECEDENT
Why are we focussing on these specific named terms? Because breach of such a term could leave you dealing with the claim yourself! When an insured requests indemnity under their purchased insurance contract, perhaps because a third party is claiming against them for negligence, an insurer will check that there is no evidence, that is facts of the case, that suggests there has been non-compliance by the insured with a condition precedent in the insurance contract that is relevant to the claim. If the facts indicate there has been then an insurer has the right to not provide indemnity for the claim in question. This would mean that the insured would have to deal with the claim themselves. So, for marine surveyors and marine engineers let us look at some of the condition precedents you may find in a contract of insurance for professional indemnity cover that you must comply with if you wish the policy to indemnify you as an insured.
Using your best endeavours to apply your standard terms and conditions of business – this in essence really means you must incorporate your standard terms and conditions of business into every agreement you have to undertake work. This is probably one if not the major cause of insurers denying claims! So beware!
Firstly, we suggest you always have a saved email template ready to send out for new work enquiries with necessary information on the template and/or inserted or attached as mentioned below because you need to incorporate your terms and conditions into your agreement with your client to undertake the work. Incorporation must in our view be done at the offer stage; that is at the point you offer to undertake the work for a sum of money or in law it says monies worth. Terms of business usually cannot be incorporate into an agreement after acceptance of your offer to undertake the work so, it usually is too late if the first time you refer to your terms and conditions of business is in your report that you send to your client. If you have a website with your terms and condition on you could provide a link in the email template to your website and state in the email that your standard terms of business apply for the work you undertake for clients that can be found at <your website link>. Another simple method, if you do not have a website that includes your standard terms and conditions, is to attach a pdf document of your terms of business to the email template or insert the document into the body of the email and refer to the attachment or inserted document as mentioned in b. above. Make sure you change the attachment or insert if you change your terms of business to your new terms of business.
You may wish to consider using an automatic signature that is inserted in your emails when you write that includes sufficient of the points above to achieve incorporation of your terms of business in all agreements you make with third parties to undertake work. Do not forget to modify the automatic signature if changes are made in the future. MOST IMPORTANTLY – Use the template! Use it to send to your existing and prospective clients requesting you undertake work for them.
The requirement that formal reports contain a clear reference that insured’s standard terms and conditions apply.
This is simply achieved if you leave a similar phrase on your report template and always specifically refer to the clause number in your report if you wish to draw your client’s attention to it. For example, you may wish to remind them that you do not comment on whether radar equipment is working as you only undertake an electric switch test to ensure electricity is reaching the radar equipment.
Use your best endeavours to ensure your sub-contractors hold and maintain adequate insurance during your period of insurance.
Slightly nebulous phrase as what is adequate? We aways say sub- contractors’ insurance limits and cover terms should reflect what our insured has in place i.e. yours
Do remember if you modify your terms and conditions of business before using them advise your broker (or insurer if dealing direct) and provide a copy to them as normally insurers need to agree they will indemnify you against claims arising from work you undertake under your new terms of business. It is advisable not to use your new terms of business until insurers have confirmed they will indemnify you for work undertaken by you under your new terms of business. On a related point, there are regulations and case law that insurers should comply with, and particular for smaller commercial clients known as micro clients that are insured, when handling claims that should regulate fairness to insureds but, there is not time to delve into this substantial area in this article. An important Act is the Insurance Act 2015 deals with issues of fair presentation by insureds (insured’s obligations) and, provides for how insurers must deal with a breach of duty of fair presentation by an insured. The above is considered on the basis of the application of the law of England and Wales and their respective courts.
DISCLAIMER Matrix Insurance Services Ltd and the authors of this article do not accept any liability for any errors or omissions in this article. The article is for general information only and is not intended to constitute legal or insurance advice and should not be treated as a substitute for such advice