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Commercial Flooring News

Maintain The Cover

A very important aspect of being a successful business owner is having adequate insurance. In this article, we will discuss the obligations that we have towards our insurers and how to understand them correctly. On 12th of August 2016 the insurance Act 2015 came in and brought the most significant reform to insurance law in over 100 years. What every London flooring company should have in mind is that a large claim or loss can basically destroy their business.

  • When an insurance policy is taken out, every business including London flooring ones, is obliged to disclose to the insurer facts – based on these facts the insurer will decide whether he will take the risk or no and if yes, on what terms. If they are not disclosed, the insurer can decide to cancel or ‘avoid’ the policy and leave the claim uninsured. With the new Act, now there is a duty governing the information that every business owner must disclose prior to taking out the policy – it is called the ‘Duty of Fair Presentation’. For every London flooring contractors it is of utmost importance to understand that if they don’t comply with the new Act, insurers might decide to reduce what they pay or even completely refuse to pay a claim.
  • Another thing which is pointed out is that a business also needs to disclose information which it is ought to know. Such material information should have been revealed by a ‘reasonable search’ – it should be stored. The Act says it might be plausible to make enquiries of professional advisers or suppliers regarding certain risks. The previous automatic remedy of avoidance of a policy if a business fails to disclose material information to insurers is now replaced by ‘proportionate remedies’ that are based on what the insurer would have done if a legitimate presentation had been made. Nothing has changed if a failure was reckless or deliberate – the Act says that this might give insurers the right to avoid the policy.
  • However, if the failure was not reckless or deliberate, the insurer has other rights. He/ she can only pay a proportion of the claim; amend the terms of the policy to those it would have agreed if a fair presentation had been made. London flooring experts point out that insurance policies commonly include terms such as ‘conditions precedent’ and ‘warranties’. Every insured business must comply with them. Formerly, a breach of warranty automatically permitted an insurer to refuse a claim. However, the Act transformed the warranties into ‘suspensory conditions’. What does that mean? Insurers can deny claim while the insured business is in breach of warranty yet in case the business later remedies the breach the cover will restart. An example which London flooring company gives is that if there is a flood as a result of a non-working fire alarm, the insurer would have been entitled to decline the cover despite the fact that the alarm might not necessarily be the reason for the loss.
  • Additionally, insurers will be allowed to rely on condition precedent in declining a claim or on a breach of a warranty if the loss is related to the breach. For instance, insurers won’t be able to rely on a breach of the fire alarm warranty when they decline a flood claim. The terms stated in the contract must be unambiguous and clear as to its effect.

The Act will be warmly welcomed by business insurance purchasers. Yet, they need to understand that the information that is to be disclosed should be true and insurers must be able to carry out the needed searches to reveal this information.

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