When a commercial insured breaches the duty of fair presentation, the insurer's remedy no longer defaults to avoidance of the whole policy. Section 8 of the Insurance Act 2015, together with Schedule 1, introduced a system of proportionate remedies that turns on the insured's state of mind and on what the insurer would have done with a fair presentation.
Under section 8(1) an insurer has a remedy only if it would not have entered into the contract at all, or would have done so on different terms, had the fair presentation been made. That is a qualifying breach. Section 8(4) then divides qualifying breaches into two categories: those that are deliberate or reckless, and those that are neither.
Where the breach is deliberate or reckless — the insured knew the presentation was in breach, or did not care — Schedule 1 paragraphs 2 to 4 allow the insurer to avoid the contract, refuse all claims, and keep the premium. The burden of proving that a breach was deliberate or reckless rests on the insurer.
For an innocent or careless breach the remedy is proportionate to what the insurer would have done:
If an insurer would have charged £15,000 rather than £10,000 had the risk been fairly presented, it pays two-thirds of any otherwise valid claim. The insured carries the balance. This is a marked change from the old all-or-nothing rule and rewards firms that present carefully.
The proportionate scheme means a careless omission at renewal is far less likely to void cover outright than under the old law, but it can still cut a claim payment sharply. For solicitors, surveyors and accountants the message is the same: the quality of the presentation directly affects how much is recoverable if something goes wrong. Apex helps firms present the risk so that the question of a qualifying breach is unlikely to arise in the first place.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.