Insurance And Reinsurance Weekly Update - 24 June 2014

Welcome to the twenty-third edition of Clyde & Co's (Re)insurance and litigation caselaw weekly updates for 2014.

A summary of recent developments in insurance, reinsurance and litigation law.

This week's caselaw

Insurance Contract Law Reform An update on the Law Commissions' insurance contract law reform. Americhem Europe v Rakem A case on whether a costs budget can be signed by a senior costs draftsman. Gordon v Fraser The court allows relief from sanctions where a witness statement/summary was not served on time. A Ltd v B Ltd A case on whether the arbitral appeal process had been "exhausted" prior to a challenge under section 67 or 68 of the Arbitration Act 1996. Martrade Shipping v United Enterprises A decision on whether the Late Payment of Commercial Debts Act 1998 automatically applies if the parties agree English law and arbitration. Insurance Contract Law Reform

The Law Commissions have published a draft bill which they believe is "settled", save for two clauses which remain controversial. These are the clauses which (1) provide that where a policy term (e.g. a warranty or a condition precedent) is designed to reduce the risk of a particular type of loss (or the risk of loss at a particular time or in a particular place) a breach will only entitle the insurer to refuse claims for losses falling within those categories; and (2) provide that it will be an implied term of an insurance contract that insurers will pay sums due within a reasonable time and late payment will attract damages from the insurer.

The Law Commissions are still hoping that the bill will follow the uncontroversial Law Commission Bills route. However, HM Treasury, which would be the sponsoring department, first wishes to consult on whether the draft bill (either with or without the two clauses mentioned above) has a broad consensus of support in order to follow that procedure. This consultation (which will end on Wednesday 2 July) differs from the Law Commissions' earlier consultation on the draft bill, which was concerned only with the question of whether the bill accurately reflected the Law Commissions' policy objectives (as set out in their earlier consultation papers). The Law Commissions are aware that this Parliamentary session is short (ending on 30 March 2015) and this new approach heightens the possibility that the two clauses mentioned above will be omitted from the final bill in order to ensure that the rest of the bill stands a chance of becoming law prior to the next election. If so, not only will the (arguably) most controversial aspect (for insurers) of the draft bill - late payment damages- be dropped in its entirety, but the reforms to warranties will be significantly watered down (leaving only the abolition of basis of the contract clauses and allowing the possibility of a breach of warranty being remedied (and the insurer coming back on cover), where that is possible).

The latest draft bill can be viewed here:

Americhem Europe v Rakem

Whether costs budget can be signed by a senior costs draftsman

PD 3E provides that a costs budget must be verified by a statement of truth signed by a "senior legal...

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