In common commercial law, when one party breaches the contract then the other party is entitled to claim damages for any loss that has been suffered due to the breach. The onus of proof for this actual, financial loss falls upon the claimant, who has to prove that he suffered loss that was caused by the breach of the contract and that the loss could be foreseen at the time the contract was concluded and, therefore, reasonable measures should be taken to avert the loss.<\/p>\n
Meanwhile, in insurance contract law, the case is not the same. English cases have clearly shown that in the same circumstances no additional damages are being allowed. The insurer is entitled to recover up to the amount that was insured, or the agreed value in specific marine insurance policies, along with the interest and costs. No additional allowance for any further damages is provided. The basis for this unique legal principle is that in insurance contract law the payments of the claims are not viewed as debts under the contract but are viewed as damages for breach of contract.<\/p>\n
The Law Commission lately has been very active in law reforming proceedings. The major step was the replacement of the Marine Insurance Act 1906 with the new Insurance Act 2015 that includes key changes in the pre-contractual duty of utmost good faith and the remedies in breach of warranties amongst other provisions for fraudulent claims and the terms of the policies. After reforming the basic legal authority for marine insurance policies, many other issues have been set on the table for discussions, as the redundancy of the provision for insurable interest and the damages for late payment of claims. The view of the Law Commission is that the above provision which does not allow a claim for further damages is \u201cunfair and unprincipled\u201d and they suggest amendments such as: – The insurers owe to cover the claims within a reasonable time and this should be established as an implied term of the contract. Whenever an insured shipowner suffers damages or economic loss caused by the late payment of the claims he could be entitled to claim and recover damages from the insurer arising out of the contractual breach.<\/p>\n
The reasonable time of cover of the claims is another issue that should always be interpreted in consideration of the specific circumstances, the size of the claim and its complexity. The reasonable time given to the underwriters to respond to the claim would allow time for unexpected or other circumstances that are out of the acting scope of the insurer. Furthermore, the assessment of the \u201creasonable\u201d element of this provision will provide a fair allowance of time for investigations and estimation of the claim.<\/p>\n
– The insurer will have the right of defence to a claim for late payment loss and damages but they will be required to show that they refused the payment, acting on a reasonable basis at that time.<\/p>\n
– The rules for time limitation will still apply. The time limitation for the original claims will still commence from the date of the loss. The time limit for the claims for late payment damages will commence from the date that the implied obligation to pay the claim within reasonable time will be breached. Even though , this might seem as disadvantageous step for the insurers, they will eventually be mindful of potential damages awards and , therefore more cautious, as happened in past cases in USA, where the insurers faced allegations that they were acting in \u201cbad faith\u201d.<\/p>\n
The Law Commission\u2019s suggestions provide safety nets and measurements in order to avoid incidents like that. The specific draft provisions for \u201ca reasonable time\u201d will leave margin for investigations and estimation of a claim by the underwriters. In defence of claims for late payments, the insurer will be entitled to prove that the dispute for the claim was based on reasonable grounds and, therefore, this could not be viewed as a breach of their implied obligation.<\/p>\n
However, the test of \u201creasonable\u201d time has always been a source of extended litigation and this time will not be different. The Law Commission\u2019s suggestions constitute an important step towards the diminishment of imbalance between the insurers and the assureds. Though, it would save time and litigation expenses if further clarifications would be included in the construing of the relevant controversial clauses. It seems like 2015 proves to be a law reforming year regarding the already received Royal Assent of the new Insurance Act 2015 and the entry of Nairobi International Convention into force, along with the above and other suggestions.<\/p>\n
Whether there will be further political appetite to implement these changes in the near future remains to be seen.<\/i><\/p>\n
Source: Nadia A. Zorba, Lecturer London Metropolitan University<\/i><\/p>\n","protected":false},"excerpt":{"rendered":"
In common commercial law, when one party breaches the contract then the other party is entitled to claim damages for any loss that has been suffered due to the breach. The onus of proof for this actual, financial loss falls upon the claimant, who has to prove that he suffered loss that was caused by […]<\/p>\n","protected":false},"author":2,"featured_media":2676,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[39,34,46],"tags":[],"_links":{"self":[{"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/posts\/2797"}],"collection":[{"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/comments?post=2797"}],"version-history":[{"count":0,"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/posts\/2797\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/media\/2676"}],"wp:attachment":[{"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/media?parent=2797"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/categories?post=2797"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/tags?post=2797"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}