Most of the Insurance Act 2015 sets default rules for business insurance. For non-consumer contracts, an insurer may contract out of many of them, but sections 16 and 17 impose conditions before a firm can be bound by a term less favourable than the Act's default. This keeps the balance the Act struck from being quietly reversed in the small print.
Section 16(1) confirms that the abolition of basis of contract clauses under section 9 cannot be contracted out of at all. It is an absolute protection. Other provisions, the remedies under section 8, the warranty rules in sections 10 and 11, the late-payment term in section 13A, can be varied for business insureds, but only if the transparency requirements are satisfied.
Section 17 sets two conditions for a disadvantageous term to be effective. First, the insurer must take sufficient steps to draw the term to the insured's attention before the contract is entered into or the variation agreed. Second, the term must be clear and unambiguous as to its effect. Whether sufficient steps were taken depends on the characteristics of the insured and the circumstances of the transaction: a sophisticated commercial buyer advised by a broker is treated differently from an unadvised small firm.
Because the test is partly about what steps were sufficient given the insured's characteristics, the presence of a broker changes the picture. A firm that reads its policy with professional help is better placed to understand a disadvantageous term, and an insurer relying on section 17 will point to that. Apex reads wordings for clients such as those in the management consultants' PI guide and the recruitment consultants' PI guide so any term that departs from the Act's defaults is identified and explained.
Common examples include a clause reinstating an all-or-nothing remedy, a warranty drafted to sidestep section 10's suspensory model, or an exclusion of the section 13A late-payment term. None is unlawful, but each must clear the section 17 hurdle to bind the firm.
Sections 16 and 17 mean the Act's protections are real but not absolute for commercial buyers. A careful reading of the wording is what turns the statutory default into genuine protection. That reading is part of what Apex does for professional clients.
The requirement that a disadvantageous term be clear and unambiguous is a real drafting standard, not a formality. Courts assessing section 17 look at whether the wording actually conveys its effect to a reader in the insured's position, and whether the insurer did enough to draw attention to it, for example by highlighting it in a schedule or in correspondence rather than burying it in standard conditions. For the insured, the practical response is to keep the documents that show what was drawn to its attention and when. Those records decide, after a dispute, whether a departure from the Act's defaults actually binds the firm.
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.