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Intelligence in Insurance Law
Delays by an Insurer
Delays by Insurers
Sometimes insurers delay, often for lengthy periods, a decision on whether or not to accept an insurance claim. This frequently occurs when the insurance claim involves large amounts of money, fire damage to property or premises, damage to industrial or commercial premises, or where the circumstances of the claim lead to investigations by other bodies, such as a work-safety department or police.
Insurers also frequently delay deciding a claim where the insurer is unable to determine how the loss claimed under the policy occurred.
On some occasions insurers have taken as long as 12 months to decide whether to pay a claim. Infrequently insurers are still undecided whether to meet a claim 3 years after the loss!
Needless to say, lengthy delay can cause significant hardship and expense for an insured, particularly if the insurance monies are needed to repair or rebuild industrial or commercial premises and equipment, or a home. On many occasions, delay will result in the insolvency of the insured company or person.
The Insurer’s Obligations
An insurer has a duty to act with the utmost good faith towards its insured. If an insurer breaches this duty an insured is entitled to monies to compensate the insured for his or her losses. Courts have held that this duty of utmost good faith can be breached by an insurer’s delay and indecision over whether to accept liability for a claim.
An insurer is under a duty to investigate and make a decision whether or not to meet a claim within a reasonable time. Courts have held that a reasonable time for an insurer to investigate and make a decision, even in difficult and complicated claims, is generally within 3 – 4 months. This time takes into account delays which may result from forensic testing. It does not matter that there may be ongoing investigations by a work-safety department or police. The insurer breaches the policy if it does not investigate and decide whether to meet the claim within a reasonable time.
General Insurance Code of Practice
Almost all non-life insurance companies are bound by the General Insurance Code of Practice.
The Code imposes obligations on insurers dealing with claims by individuals and small businesses for certain types of insurance. The obligations apply in relation to home building, home contents, motor vehicle, sickness and accident, consumer credit and travel insurance.
The Code obliges an insurer to only ask for and rely on information relevant to its decision to decide the claim.
Under the Code, where an insured demonstrates that he or she has urgent financial need to the entitled policy benefits, the insurer must fast track the assessment and decision process of the claim, or alternatively make an advance payment to assist in alleviating the insured’s immediate hardship within 5 business days of demonstrating the urgent financial need.
The Code provides that where an insurer has received a claim and has received all necessary information and completed its investigations, the insurer is to decide the claim within 10 business days.
If the insurer requires further information or assessment, the Insurer is within 10 business days to notify the insured of any information required to make a decision on the claim and, if necessary, appoint a loss adjuster or loss assessor. The insurer is also to provide an initial estimate of the timetable and process for making a decision on the claim.
The Code obliges the insurer to keep the person who is claiming on the insurance informed about the progress of the claim at least every 20 business days and to respond to routine requests about the progress of the claim within 10 business days.
The Code obliges an insurer to make a decision within 4 months of lodging the claim unless exceptional circumstances apply.
Remedies for Delay
Where there has been significant delay or indecision, generally a solicitor’s letter to the insurer will result in a prompt decision.
Where there is excessive delay, legislation provides that the insurer must pay interest at a high rate on the amount of the claim.
Additionally, an insured can claim for any loss or damage which the insured suffers due to excessive delay in meeting the claim. By way of example, such loss or damage may comprise loss of profits for a business where its premises or equipment are damaged, or accommodation expenses where a home has been rendered unlivable, and the insurer has not promptly met the claim.
Other remedies may apply depending on the nature of the claim.
Please call or contact me should you wish to discuss or have any queries in relation to the matters above.
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