From 4 May 2017 it became possible for policyholders to recover damages from insurers who have not paid valid claims within a 'reasonable period of time'.
The Law
The change has been brought about by section 28 of the Enterprise Act 2016 which introduced a new section 13A into the Insurance Act 2015 (the Act). It states that insurers "must pay any sums due in respect of the claim within a reasonable time". Under the 'old' law there was no obligation on insurers to settle claims within a reasonable period and an insured's only remedy in the event that an insurer was late paying a claim was for interest on the sums due and payable under the policy. There was no right to damages even if the insured suffered significant losses as a result of the delay.
It is now an implied term of every insurance contract that an insurer must pay any sums due in respect of a claim made by the policyholder "within a reasonable time". A reasonable time includes a reasonable time to investigate and assess the claim. Reasonableness is likely to be assessed objectively and will depend on all of the relevant circumstances, including the size and complexity of the claim, the type of insurance and factors outside of the insurer's control.
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