As expected, the terms of the trade deal agreed between the United Kingdom and the European Union mean that Solvency II passporting rights are no longer available to UK insurers wishing to conduct insurance business in the European Economic Area. What is clear in relation to both legacy and new business is that firms must communicate with customers and keep them informed of any new developments that may affect their enjoyment of their policies.
The High Court has handed down judgment in the COVID-19 business interruption insurance test case of The Financial Conduct Authority v Arch. Following expedited proceedings, the judgment brings highly anticipated guidance on the proper operation of cover under certain non-damage business interruption insurance extensions.
The Court of Appeal recently confirmed that the reinstatement basis was the appropriate measure of indemnity for property severely damaged by fire which had not been reinstated. The court held that an insured need not show that it had a genuine, fixed and settled intention to reinstate in order to recover for damaged property on a reinstatement basis of indemnity.
The Prudential Regulation Authority recently published guidance for UK insurers on their ability to service EEA liabilities once the Brexit transition period comes to an end on 31 December 2020. Arguably, the guidance is consistent with the view that 'expat business' (ie, where policies were written in the United Kingdom but the policyholder subsequently moved to the European Economic Area) can continue to be serviced from the United Kingdom without an EEA authorisation.
The High Court has continued an anti-suit injunction against a defendant, having been satisfied to a high degree of probability that the parties had agreed to submit their dispute to London arbitration. The central question was one of contractual interpretation: whether, on a true interpretation of the relevant excess insurance policy, the 'service of suit' clause entitled the insured to pursue its substantive claim against its insurers before a US court or whether it had to arbitrate.
Warranty and indemnity (W&I) insurance is widely used across the breadth of global M&A activity to provide protection to buyers for breaches of warranty. While W&I insurance policies govern how and what claims can be made by buyers, there is considerable case law relating to the measure of damages for breach of warranty. In particular, recent case law confirms that the normal measure for damages is the difference between the value of the shares 'as warranted' and the value of the shares 'as is'.
The High Court recently awarded a non-party costs order against a law firm's professional indemnity insurer under Section 51 of the Senior Courts Act in circumstances where the insurer had effectively relinquished control of the litigation's defence. This decision clarifies that the court's discretion under Section 51 is broad and that an insurer need not exert any active control over an insured's conduct of the proceedings in order to be the subject of an adverse costs order.
The High Court recently considered a negligence claim against an insurance broker which had arisen out of a fire at a waste recycling facility. In its decision, the court provided a useful recap on brokers' duties – in particular, their duty to advise clients on their pre-inception duties of disclosure. Notably, the judge considered how causation should be analysed in brokers' negligence cases where the insured has not pursued the claim against its insurer to settlement, judgment or award.
In holding that a broker was not in breach of duty by failing to give oral advice in relation to the disclosure of criminal convictions, the High Court has provided a useful reminder of the extent of a broker's duty to advise in relation to disclosure. The court also held that a lack of expert evidence materially limited, but did not exclude, the possibility of a finding that the broker had breached its duty to act with reasonable care and skill.
Recent announcements made by the Prudential Regulation Authority and the Financial Conduct Authority have clarified their approach to Brexit following the European Council's agreement to a transition period for the United Kingdom's withdrawal from the European Union. Insurers, insurance intermediaries and other financial services firms have been encouraged to assume that they will continue to benefit from passporting rights until December 2020. While this is welcome, firms cannot be complacent.
The English Court of Appeal has reversed the High Court's decision on whether a party-appointed arbitrator met the contractual requirements as to requisite experience. The English Court of Appeal held that that an English queen's counsel with experience of insurance and reinsurance law was sufficient to comply with a contractual clause requiring arbitrators to have "experience of insurance and reinsurance". The decision highlights once again the importance of drafting arbitration clauses clearly.
The Treasury, Prudential Regulation Authority (PRA) and Financial Conduct Authority recently clarified their approach to EEA-headquartered financial services firms wishing to carry on business in the United Kingdom post-Brexit. More recent evidence to the House of Commons Treasury Committee sheds further light on the PRA's thinking. It also highlights the difficulty for the PRA of giving guidance to firms while so much uncertainty surrounds the United Kingdom's future relationship with the European Union.
A recent opinion published by the European Insurance and Occupational Pensions Authority warns that UK insurers are unlikely to be able to meet obligations to European Economic Area (EEA) policyholders post-Brexit unless they mitigate the anticipated loss of passporting rights that will come with leaving the single market. The opinion raises concerns for UK insurers which have policyholders in EEA states other than the United Kingdom.
The Court of Appeal recently ordered two companies in liquidation to provide security to the defendants despite an after-the-event (ATE) policy. The decision confirms that the court can take account of a claimant's ATE insurance policy when considering whether to make an order for security for costs. However, the court stressed that the outcome of any security for costs application involving an ATE policy will depend on the terms of the particular policy.
In a recent case, the Commercial Court found in favour of the defendant insurer in regard to the disputed construction of an insolvency exclusion in a professional indemnity insurance policy. The case is a useful restatement of the law on the interpretation of exclusion clauses in insurance contracts. It also serves as a reminder that policyholders should not assume, simply because an exclusion is widely drafted, that it will not be upheld by the courts in the event of a dispute.
Recent comments made by the chief executive officer of the Prudential Regulation Authority (PRA) about its approach to supervision are worrying. An undelivered speech argues, among other things, that it is not enough for firms to meet the requirements of the regulatory regime, they must also comply with the spirit of the rules. Further, it states that the PRA will form its own judgement about what this means for firms, despite UK obligations under EU law.
The Court of Appeal has held that a reinsurer failed to establish that material non-disclosure of past loss statistics induced it to enter into two reinsurance contracts. Though the reinsurance contracts at issue predated the Insurance Act 2015, the judgment is relevant to insurance and reinsurance contracts governed by the new act. The new proportionate remedies for breach of the duty of fair presentation are available only if the (re)insurer is able to demonstrate inducement.
Peel Port applied for pre-action disclosure of the defendant's insurance policy. The court refused to order disclosure of a solvent insured's insurance policy contrary to established practice. However, the judgment does leave open the possibility that pre-action disclosure of a defendant's insurance policy may be ordered where the test is met.
The Supreme Court recently handed down its judgment in a case relating to underlying claims arising out of services provided by a solicitors' firm. The court allowed the appeal and remitted the case back to the High Court. The Supreme Court held that determining the meaning of "a series of related matters or transactions" in the aggregation clause contained in the minimum terms and conditions for solicitors' professional indemnity insurance necessitated a fact-sensitive inquiry.
The Court of Appeal recently upheld the Commercial Court's finding that an insurer could not rely on a notification condition precedent to avoid liability under a public and product liability policy. The judgment serves as a reminder that it is crucial for policyholders to be aware of the notification provisions in their policies and when their obligations to notify are triggered.