EIOPA Conference: The Main Themes

Three of the themes that EIOPA sees as its priorities were covered at its annual conference on 20 November. All of the topics were the subject of frank and spirited debate, with a range of different views being represented in the panel discussions.

EIOPA should be commended for encouraging views that were contrary to its own to be expressed, an approach which made for a worthwhile and balanced discussion of the topics.

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Brexit Final Political Declaration: Nothing [new] to see here?

The Political Declaration setting out the Framework for the Future Relationship between the EU and the UK was published earlier today.

On financial services (including insurance), the final declaration essentially contains the same three points as in last week’s outline political declaration (as discussed in our blog post of 15th November), although there is some limited further clarification.

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Brexit deal – what does it mean for insurers and insurance intermediaries?

Yesterday’s announcements on the terms agreed for the UK’s withdrawal from the EU say relatively little about the future framework for cross-border trade in goods or services.  More detail is expected on this next week.

The final deal remains subject to approval by the European Council, the EU Parliament and, crucially, the UK Parliament.  Nonetheless, yesterday’s agreement must have increased the chances of a transitional (or implementation) period for the UK’s withdrawal from the EU.  During that period, both (re)insurers and (re)insurance intermediaries would continue to benefit from the passporting rights that they currently hold, but ultimately stand to lose.

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Brexit – Deal on financial services may deliver little for insurance industry

Press reports over the past couple of days suggest that a deal struck by the UK government would “give UK financial services companies continued access to European markets after Brexit” and that “UK financial companies will be able to operate as they now do in Europe“.

There has not been any confirmation that a deal on services has in fact been reached. Rather, there have been denials. Any deal on services is also dependent on all other aspects of a withdrawal agreement and the new UK-EU relationship being agreed.

The press reports suggest that the EU may have agreed to accept that the UK regulatory regime is “equivalent” to EU standards (which will undoubtedly be true at the time of exit), and that the UK will be given greater certainty than other third countries that this acceptance will not be arbitrarily withdrawn. Michel Barnier has since suggested (in a tweet on 1 November) that this greater certainty for the UK as to withdrawal of equivalence may not be forthcoming.

Whether or not a deal has in fact been reached on services, it is important to recognise that securing “equivalence” does not mean that UK insurers and intermediaries can continue to carry on cross-border business as if they held passporting rights.

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Coverage for ‘Doomsday or Armageddon’ data breach class actions: insurance implications of the Court of Appeal’s decision to confirm Morrisons’ vicarious liability for employee’s deliberate actions

In the recent judgment in Wm Morrisons Supermarkets Plc v Various Claimants [2018] EWCA Civ 233 the Court of Appeal has dismissed an appeal against the High Court’s decision that Morrisons was vicariously liable for its employee’s misuse of data, despite: (i) Morrisons having done as much as it reasonably could to prevent the misuse; and (ii) the employee’s intention being to cause reputational or financial damage to Morrisons itself. It is understood that Morrisons intends to appeal to the Supreme Court. Our full analysis of the Court of Appeal’s decision can be found here.

Companies now find themselves exposed to potential UK data breach class action claims, including for distress-based damages, based on vicarious liability, even if they have appropriate safeguards in place and even if they are the intended victim of the breach. Day by day businesses find themselves responsible for higher volumes of personal data; and the risk of data breach claims is exacerbated by the legislative changes made by the GDPR, increasing public awareness of data protection issues and the publicity that this case has attracted. In addition, the facts of Morrisons were such that the company had been found not to be in breach of data protection laws. Future class action claims may be even easier to launch in circumstances where a company has been found to breach the GDPR, for example, by not having appropriate security measures in place. It is understood that Morrisons intends to appeal to the Supreme Court.

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Brokers’ negligence – guidance on the scope of the duty and causation

In Dalamd Limited v Butterworth Spengler Commercial Limited [2018] EWHC 2558 (Comm), Mr Justice Butcher considered a negligence claim against the Defendant insurance broker arising out of a fire at a waste recycling facility. The insured’s claim succeeded in part.

In his decision, the Judge provided a useful recap on brokers’ duties, in particular their duty to advise clients on their pre-inception duties of disclosure. Of particular note, he also considered how causation should be analysed in brokers’ negligence cases where the insured has not pursued the claim against its insurer to settlement, judgment or award. His conclusion – which will be well received by brokers – was that whether a good defence to the policy claim was available to an insurer will be assessed on the balance of probabilities (i.e. a yes/no basis), and not a loss of a chance basis. Whether there was another defence available to the insurer, for which the broker was not responsible, will likewise be assessed on the balance of probabilities, although the issue of whether the insurer would have pursued that point is to be assessed based on loss of chance.

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Sanctions clauses in a Changing sanctions regime

In Mamancochet Mining Limited v Aegis Managing Agency Limited and Others [2018] EWHC 2643, the High Court held that, in order to avoid payment of a claim, insurers were required to show that payment would expose them to sanctions under US or EU law. A mere exposure to the risk of a sanction was not sufficient.

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Credit insurance – it’s time to focus on this important cover

Credit risk insurance and export credit agency (ECA) guarantees play an important role in facilitating trade, whether that is in commercial supply chains, large projects or complex financial transactions.  The product has, arguably, never been more important.   The collapse of a number of well-known names in the UK high street in recent months has brought a renewed focus on the benefits of credit insurance.  Indeed the ability to secure credit risk insurance is sometimes seen indicator of the financial health of a company.  In recent years, financial institutions have also increasingly looked to credit risk insurance as a way of maximising capital relief.

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Brexit Continuity Clauses: what policyholders need to know

We have assisted Airmic to produce a guide for policyholders on Continuity Clauses, which some in the insurance market are using to prepare for the impact of Brexit.

The clauses aim to provide a level of contract continuity in the event that the UK leaves the EU without suitable transitional arrangements being put in place or without an agreement allowing UK insurers to perform cross-border business into the EEA.

The guide explains those Brexit issues of particular relevance to policyholders and explains what Continuity Clauses aim to do. Policyholders are encouraged to discuss the implications of Brexit for their insurance programme with their broker and this guide should assist policyholders in those discussions. Click here to access the guide.

Herbert Smith Freehills is Airmic’s Preferred Service Provider on insurance law issues and has assisted Airmic in producing a number of its technical guides over the past few years.

Paul Lewis
Paul Lewis
Partner, London
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+44 20 7466 2138
Geoffrey Maddock
Geoffrey Maddock
Partner, London
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+44 20 7466 2067
Sarah Irons
Sarah Irons
Professional Support Lawyer, London
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+44 20 7466 2060
Alison Matthews
Alison Matthews
Consultant, London
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+44 20 7466 2765

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COURT OF APPEAL DECISION IN ENRC: ORTHODOXY RESTORED ON LITIGATION PRIVILEGE, BUT NARROW INTERPRETATION OF “CLIENT” REMAINS FOR NOW

The Court of Appeal has handed down its eagerly awaited decision in the ENRC appeal: The Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Ltd [2018] EWCA Civ 2006. At first instance, the High Court took a restrictive approach to both litigation privilege and legal advice privilege (see our summary of the decision here). The Court of Appeal has allowed the appeal on the question of litigation privilege but has, with apparent reluctance, dismissed the appeal on legal advice privilege, concluding it is a matter for the Supreme Court.

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