Section 13A claims handling duty

Section 13A of the Insurance Act 2015 implies into every contract of insurance a term that the insurer must pay any sums due in respect of a claim within a reasonable time, breach of which entitles the insured to damages in addition to the sums payable under the contract.

Definition §

Section 13A of the Insurance Act 2015 — inserted by section 28 of the Enterprise Act 2016 — creates a new implied term that the insurer must pay any sums due in respect of an insurance claim within a reasonable time. Breach of the implied term is actionable by the insured for damages in addition to the underlying sums recoverable under the policy. The provision filled a significant gap in English insurance law, which previously did not recognise a freestanding right to damages for late payment of insurance proceeds.^[1]

The reform addressed a problem highlighted by the Court of Appeal in earlier authorities including Ted Baker plc v AXA Insurance UK plc: under the pre-2017 law, an insurance contract was treated as a contract to pay damages (an indemnity), so any sums due were themselves damages. This meant that the insurer's failure to pay within a reasonable time was not itself a breach giving rise to further damages, leaving insureds without a remedy for consequential losses caused by delayed payment.^[2]

Section 13A applies to all contracts of insurance — consumer and non-consumer — entered into on or after 4 May 2017. For contracts entered into before that date, the older common-law rule continues to apply. The provision is therefore now firmly embedded in claims handling practice across UK insurance.^[3]

Legal / Regulatory basis §

Section 13A is set out in five subsections. Subsection (1) provides that it is an implied term of every contract of insurance that, if the insured makes a claim, the insurer must pay any sums due in respect of the claim within a reasonable time.

Subsection (2) defines "a reasonable time" as including "a reasonable time to investigate and assess the claim." This recognises that genuine claims handling activities — investigation, loss adjustment, expert reporting and quantification — necessarily take time.

Subsection (3) sets out the factors to be considered in determining what is reasonable, including "the type of insurance, the size and complexity of the claim, compliance with any relevant statutory or regulatory rules or guidance, and factors outside the insurer's control." This list is not exhaustive; the court may have regard to any other relevant matter.

Subsection (4) provides a defence: if the insurer can show that there were reasonable grounds for disputing the claim (whether as to the amount of any sum payable, or as to whether anything at all is payable), the insurer is not in breach merely by failing to pay the claim (or the disputed part of it) while the dispute is continuing. However, the insurer's conduct in handling the claim may be a relevant factor in deciding whether the term has been breached and, if so, when.

Subsection (5) provides that remedies for breach of the implied term are in addition to, and not in substitution for, any right to enforce payment of the underlying sums and any right to interest under any other provision.^[4]

Section 16A (inserted alongside section 13A) restricts contracting out: parties to a non-consumer contract may exclude liability for breach of section 13A only in respect of breaches that are not deliberate or reckless, and only subject to the transparency requirements of section 17. Liability for deliberate or reckless breaches cannot be excluded.^[5]

The Law Commission's 2014 report recommended the late-payment remedy after extensive consultation with industry, the judiciary and consumer representatives. The reform was deferred from the original Insurance Act 2015 to allow further work; section 28 of the Enterprise Act 2016 then inserted it with effect from May 2017.^[6]

How it works in practice §

In practice, section 13A has reshaped claims handling expectations across UK insurance. Insurers now expressly factor the section into their claims protocols, with internal targets for acknowledgement, investigation and decision-making aligned with the "reasonable time" standard. The FCA's Insurance: Conduct of Business Sourcebook (ICOBS) imposes parallel claims handling obligations, and compliance with ICOBS is expressly identified in section 13A(3)(c) as a relevant factor.^[7]

When a breach is alleged at claims stage, the analysis proceeds in three steps. First, the insured establishes that the claim is one to which sums are due (typically requiring a determination on coverage and quantum). Second, the court considers whether those sums were paid within a reasonable time, having regard to the section 13A(3) factors. Third, if there has been a delay beyond a reasonable time, the court considers whether the insurer had reasonable grounds for disputing the claim under section 13A(4) — and if so, when those grounds ceased to apply.

Damages for breach are recoverable on ordinary contractual principles. The insured must establish loss flowing from the delay, subject to the rules on remoteness, causation and mitigation. Common heads of loss include consequential business interruption beyond the period for which the policy pays, additional financing costs, lost commercial opportunities and reputational damage where established by evidence.

The first reported judgments under section 13A have begun to give shape to the "reasonable time" standard, although jurisprudence is still developing. The general principle is that insurers are entitled to a sufficient period to investigate and assess claims, but cannot delay decision-making indefinitely or use protracted enquiries to avoid difficult coverage questions.

Common variations §

Section 13A applies uniformly across all classes of UK insurance, but the practical effect varies by claim type and complexity. For straightforward claims (such as small property losses with clear policy coverage), "reasonable time" may be measured in weeks; for complex liability or business interruption claims involving multiple parties and expert evidence, it may be measured in months or even longer.

In consumer claims, the Financial Ombudsman Service applies its own broadly equivalent expectations of timely handling, and breach of section 13A would also typically constitute a breach of the FCA's Consumer Duty. In commercial claims, section 13A is enforceable through the courts and forms a stand-alone cause of action.

Contracting out is permitted in non-consumer insurance only within the constraints of section 16A and section 17. Some specialist policy wordings expressly limit the insurer's liability for breach of section 13A to the maximum extent permitted, but cannot exclude liability for deliberate or reckless breaches.^[8]

For reinsurance, section 13A applies as it does to direct insurance, although the "reasonable time" assessment will reflect the reinsurance context — including the time required for cedant claims to be quantified and notified.

Example §

A retail group suffers significant fire damage to one of its premises in March 2026. The combined policy provides cover for material damage and business interruption. The insurer accepts coverage in principle but disputes the quantum of business interruption losses, requiring extensive accountant reports and forensic analysis. By February 2027, eleven months after the loss, the insurer has still not made any interim payment or agreed to a final figure, despite the insured providing all reasonable supporting information by August 2026.

The insured commences proceedings, claiming the underlying business interruption loss and, in addition, damages for breach of section 13A. The court accepts that the insurer was entitled to a reasonable period to investigate and assess the complex claim, but finds that by November 2026 the insurer should have made a substantial interim payment of the undisputed minimum. The court awards damages reflecting the additional financing costs incurred by the insured during the unreasonable delay, in addition to the underlying loss and statutory interest.

See also §

• /wiki/late-payment-damages/ — the substantive remedy under section 13A
• /wiki/enterprise-act-2016-amendments/ — the inserting statute
• /wiki/insurance-act-2015/ — the parent statute
• /wiki/fair-presentation-of-the-risk/ — placement duty
• /wiki/consumer-insurance-disclosure-and-representations-act-2012/ — consumer regime
• /wiki/business-interruption-insurance/ — class often engaging section 13A
• /wiki/contract-certainty/ — related claims-handling theme

References §

1. ↑ Insurance Act 2015, section 13A (as inserted by Enterprise Act 2016, section 28), https://www.legislation.gov.uk/ukpga/2015/4/section/13A
2. ↑ Ted Baker plc v AXA Insurance UK plc [2017] EWCA Civ 4097
3. ↑ Enterprise Act 2016, section 28 and Schedule 1, https://www.legislation.gov.uk/ukpga/2016/12
4. ↑ Insurance Act 2015, section 13A(2)-(5)
5. ↑ Insurance Act 2015, section 16A and section 17
6. ↑ Law Commission and Scottish Law Commission, "Insurance Contract Law: Business Disclosure; Warranties; Insurers' Remedies for Fraudulent Claims; and Late Payment" (Law Com No 353 / Scot Law Com No 238, July 2014), https://lawcom.gov.uk/
7. ↑ FCA Handbook, Insurance: Conduct of Business Sourcebook (ICOBS), Chapter 8 (Claims handling)
8. ↑ Insurance Act 2015, sections 16A and 17