Before the Insurance Act 2015, insurers routinely inserted a basis of the contract clause into proposal forms. It converted every answer a firm gave into a warranty. If a single answer was inaccurate, however trivial and however unrelated to the loss, the insurer could treat the warranty as breached and escape liability entirely. It was a harsh and much-criticised device.
Section 9 of the Insurance Act 2015 abolished basis clauses for non-consumer insurance. A representation made by the insured in connection with a proposed contract, or a variation, cannot be converted into a warranty by any provision of the contract or of the proposal. Any term that purports to do so is of no effect. The equivalent protection for consumers already existed under the Consumer Insurance (Disclosure and Representations) Act 2012.
The practical result is that answers on a professional indemnity proposal are now representations, governed by the duty of fair presentation, rather than warranties. An inaccurate answer is dealt with under sections 3, 7 and 8, that is, was it material, was it a qualifying breach, was it careless or reckless, rather than automatically voiding cover. That is a far more balanced regime for professional firms.
Section 9 does not abolish warranties as such. An insurer can still include a genuine warranty about a specific ongoing matter, for example a requirement to maintain particular records or procedures. What it cannot do is manufacture warranties wholesale out of proposal answers. Where a genuine warranty exists, section 10 now governs its effect.
Engineers and surveyors complete detailed technical proposals covering project values, disciplines and sub-consultant arrangements. Under the old law a minor slip could have been fatal to a claim. Section 9 removes that trap. The engineers' PI guide and the surveyors' PI guide set out the proposal detail these firms face.
Section 9 cannot be contracted out of to the insured's disadvantage; it is one of the provisions the Act protects absolutely. Apex reviews proposal wordings so clients understand which answers are representations and how they are treated if inaccurate.
Section 9 did not appear in isolation. It followed years of work by the Law Commission and the Scottish Law Commission, whose joint reports criticised basis clauses as a trap that allowed insurers to escape liability on immaterial and unrelated inaccuracies. The Consumer Insurance (Disclosure and Representations) Act 2012 dealt with the consumer side first; the Insurance Act 2015 extended equivalent protection to business insureds. Understanding that lineage helps a firm see why the modern regime is deliberately weighted against technical defences and towards proportionate, cause-based outcomes.
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.