Insurance policies often contain conditions designed to reduce the risk of a particular kind of loss, for example a requirement to keep certain records, use particular safeguards, or take specified precautions. Under the old law, breaching such a condition could let an insurer refuse a claim that had nothing to do with the breach. Section 11 of the Insurance Act 2015 curtails that.
Section 11 applies to any term, other than one defining the risk as a whole, that if complied with would tend to reduce the risk of loss of a particular kind, at a particular location, or at a particular time. Where the insured has breached such a term, the insurer cannot rely on the breach to exclude, limit or discharge its liability if the insured shows that the breach could not have increased the risk of the loss that actually occurred in the circumstances in which it occurred.
Imagine a technology consultant's policy requires the firm to keep backups of client data. The firm lets backups lapse, then faces a professional negligence claim for defective advice unrelated to any data loss. Under section 11 the backup failure could not have increased the risk of that particular negligence claim, so the insurer cannot use it to refuse the claim. The term protected a different kind of loss.
Section 11 does not touch terms that define the risk as a whole, for example a clause limiting cover to a particular category of professional work. Those genuinely delimit what the firm bought and remain fully effective. The section targets narrower, risk-reducing conditions, not the scope of the insuring clause.
Professional indemnity policies carry numerous procedural conditions. Section 11 ensures a firm is not deprived of cover for an unrelated claim because of a compliance slip on a different front. The IT professionals' PI guide and the engineers' PI guide describe the varied conditions these firms carry across projects. Apex helps clients see which conditions are risk-specific and how section 11 applies.
The onus sits on the insured to show the breach could not have increased the risk of the actual loss. Good records help discharge that burden, which is another reason Apex encourages clients to document their compliance.
Section 11 is a shield against technical reliance on unrelated breaches, not a cure-all. It does not help where the breach could have increased the risk of the actual loss, and it does not touch fraud, which is governed separately by sections 12 and the general law. Nor does it override a term that genuinely defines the risk as a whole. A firm should therefore still treat every policy condition as binding and comply with all of them; section 11 is a safeguard for the case where an insurer reaches for an irrelevant breach, not a licence to be casual about compliance.
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.