When fire engulfed the Notre Dame Cathedral in Paris, people from across the globe rushed to pledge money to help fund the repair costs. It was a staggering show of generosity that will almost certainly see this iconic French cathedral restored to glory and will secure its future for generations to come.
Such an outpouring of public support is not something many businesses suffering a similar catastrophic event can expect to receive. Instead, any hope of reinstatement and recovery for them will rest with their insurer agreeing to pick up the tab.
In most cases the claims process will proceed smoothly, but difficulties may arise where questions are raised about the extent of the insurance cover in place or a failure on your part to disclose material facts at the time the policy was negotiated or renewed. A debate over the sum to be paid may arise where it is alleged that your response to the event giving rise to the claim has made matters worse or where you are accused of having failed to take action which was reasonable to mitigate your loss.
You could find yourself embroiled in a dispute with your insurer directly or with the broker who arranged the policy on your behalf, particularly where their mistakes have left you unacceptably exposed.
In either case prompt legal advice is crucial to obtaining the best possible outcome.
Insurance disputes can arise for a wide range of reasons and it is important to understand the options for dealing with them. These will vary depending on what the dispute is about, the size and nature of your business and the ultimate outcome you are seeking to achieve.
Some disputes can be settled through negotiation, while others require formal determination by the court or an arbitrator. Certain disputes involving smaller businesses may even be capable of resolution through the Financial Ombudsman Service.
Common triggers for insurance disputes
One of the most frequently encountered problems when dealing with an insurance claim is where the insurer seeks to cancel the policy on the basis of your alleged failure to disclose material facts at the time cover was arranged or renewed.
In some cases this is an entirely legitimate response, while in others it is completely unjustified and should be resisted.
The rules are complex but, generally speaking, unless the terms of your policy clearly provide otherwise, there will be no right to cancel your policy and refuse a payout unless your failure to disclose all material facts was:
- deliberate or occurred because of recklessness on your part; or
- unintentional but it is clear that if full disclosure had been made the insurer would never have issued a policy to you.
In all other cases the question of what your insurer may or may not be entitled to do will be answered by reference to what they would have done had the undisclosed information been provided and to what would now be a proportionate response in the circumstances.
There is huge scope for compromise here, for example by tweaking the terms of your policy to reflect those that would have been imposed had full disclosure been made or by you agreeing to a reduction in any payout you receive to take account of the higher premium that would have been charged had all relevant information been to hand at the time the policy was issued.
Skillful negotiation by your lawyer can also help to achieve a compromise where your insurer alleges that the cover under your policy:
- does not extend to the loss or damage you are seeking to claim for; or
- was not active at the time of the event giving rise to the claim, for example because of a gap between the current policy starting and an old one finishing or because of policy suspension due to breach of a warranty term.
Where the wording of a policy document is unclear, it may be possible to persuade the insurer to adopt a more generous interpretation of events covered and excluded so that payment of at least a part of your claim can be secured.
Likewise, where a gap in cover exists it may be possible to persuade an insurer to agree to plug this gap particularly where it is not obvious who is to blame or where it has clearly arisen as a result of a clerical error or genuine misunderstanding.
Sometimes the key to resolving a dispute lies not in negotiations with the insurer but with the broker who arranged the policy. This is particularly likely where an inadequate assessment of your business resulted in you being sold a policy that fails to meet your needs or where insufficient cover was arranged despite the broker being aware that a greater degree of cover was required.
Fraudulent claims
Probably the most difficult kind of dispute to resolve is one in which the insurer is alleging a right to cancel your policy on the basis that the claim you have made is fraudulent. In this scenario immediate advice should be sought in order to secure independent verification of your claim and to avoid the insurer referring the matter to the police with a view to criminal charges being brought.
For further advice on any of the issues raised in this article, or for employment law advice more generally, please contact JPP Law on 020 3468 3064 or email info@jpplaw.co.uk
