Major changes to insurance law came into force on 12 August 2016 by virtue of the Insurance Act 2015.

Some of the changes will be of benefit to those who have to insure UK real estate and this could provide comfort to mortgagees. The headlines are –

  • New concept of ‘fair disclosure’ by policy holders which replaces the more onerous ‘full disclosure’. Under the old law, failure to disclose fully meant that the policy was avoided even if the breach was minor. This was always an issue in looking at defective title policies taken out by a previous owner when the disclosure materials from the time the policy was taken out are not available. Now there is a proportionate remedy for a failure to disclose;
  • Updates to remedies for breach of warranty – meaning that in some cases, a breach of warranty by a policyholder merely suspends cover, rather than terminates the insurance contract altogether. Again a real improvement for the policy holders especially for minor breaches;
  • Changes apply to all UK policies after 12 August 2016 including amendments, renewals and endorsements to existing contracts.

The real estate sector should benefit from the changes and for more information read our expert insurance recovery team’s alert here

We can also see from a recent court case that even under the old law insurers could not avoid a claim despite a lie being told when the claim was made. This lie was irrelevant so in effect the policy holder was treated as if the new law applied. Not all liars will get such an outcome. Policies may change to deal with this issue so new policies need to be checked carefully. You can see an analysis of the case here