Section 11 of the Insurance Act 2015 is one of the most practically important protections a commercial insured has. It prevents an insurer from escaping a claim on a technicality where the term breached had nothing to do with the loss that actually happened.
Section 11(1) applies to any term — a warranty, condition or exclusion — compliance with which would tend to reduce the risk of one of the following: loss of a particular kind, loss at a particular location, or loss at a particular time. It does not apply to terms that define the risk as a whole, such as the description of the professional activities covered.
Section 11(3) provides that the insurer may not rely on non-compliance with such a term to exclude, limit or discharge its liability if the insured shows that the non-compliance could not have increased the risk of the loss which actually occurred in the circumstances in which it occurred. The burden is on the insured, but the test is generous: not whether the breach did cause the loss, but whether it could have increased the risk of the particular loss that happened.
Imagine an IT consultancy's PI policy contains a condition requiring encrypted backups of client data. The firm lets the backup condition lapse, then faces a professional negligence claim arising from flawed advice on a software architecture — nothing to do with data loss. Under section 11 the insurer cannot decline the negligence claim on the back of the backup breach, because that breach could not have increased the risk of the loss that actually occurred.
Section 11 is not a cure-all. If the breach could have increased the risk of the very loss that happened, the insurer keeps its remedy under the relevant term or under section 10. And it does not touch terms defining the risk as a whole — an activity the firm is simply not covered to perform remains outside the policy regardless of causation.
Modern PI wordings carry conditions about supervision, record-keeping, cyber hygiene and vetting. Section 11 means a firm that has slipped on one such condition is not automatically shut out of an unrelated claim, but it still has to prove the lack of connection. Good records make that proof possible. IT professionals, surveyors and accountants benefit from documenting their procedures precisely so the causation argument can be run if needed. Apex helps firms read these conditions and understand where section 11 does and does not protect them.
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.