Ben Macfarlane, who is a partner at law firm, Ross and Co. Solicitors LLP has evaluated the impact of this seismic legislative change on the superyacht market for SuperyachtNews.com:
‘The main areas of change relate to the following aspects of the insurance contract:
1. The assured’s duties in relation to misrepresentation and non-disclosure;
2. The insurers’ remedies in relation to a breach of the insured’s duties regarding fair presentation of the risk;
3. The effect on the policy of a breach of warranty which under the current law is draconian;
4. There are also new rules regarding the link between breaches of warranties and conditions precedent and the loss, which actually occurs (no link has been necessary for avoidance under the current rules).
‘The new law will require a “fair presentation” by the assured. It will require policyholders to either (1) disclose to insurers “every material circumstance” which the assured knows or ought to know or (2) provide the insurer with sufficient information to put a prudent insurer on notice that he needs to make further enquiries into “material circumstances”.
‘As you will appreciate, this is a subtle shift. The onus is still on the insured to make a fair presentation, but no longer one of “utmost good faith”.
‘The existing law under the Marine Insurance Act 1906 is that a breach of warranty discharges the insurer from all liability from the date of the breach but does not prejudice any liability incurred before that date.
‘Under the new Insurance Act (sections 9 to 11) the effect of a breach of warranty will be less severe. Any breach of warranty by an assured will merely suspend the insurer’s liability until the breach is remedied. So the breach of warranty will only be effective while it is ongoing.'
Macfarlane's full analysis of the ramifications of the Insurance Act 2015 will appear in Issue 166 of The Superyacht Report.