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Consumer Insurance (Disclosure and Representations) Act 2012

Consumer Insurance ActThe Consumer Insurance (Disclosure and Representations) Act 2012 came into force on 6 April 2013 and applies to all consumer insurance contracts entered into on or after that date. The Act modifies principles of consumer insurance law in England, Wales, Scotland and Northern Ireland. This Act applies only to consumer insurance contracts, or insurance contracts made by individuals ‘wholly or mainly for purposes unrelated to their trade, business or profession’. This also includes ‘mixed-use’ contracts, or contracts that cover both personal and business use, as long as the main purpose of the insurance contract is personal. These new duties and responsibilities will not affect commercial or business insurance contracts. The following provides a general overview of the new requirements and duties for the consumer, and insurer remedies if duties are breached. GENERAL OVERVIEW Previously when purchasing personal insurance, the consumer had a legal duty to disclose and not misrepresent any material fact that a prudent insurer would consider relevant. If a consumer breached this duty, the insurer could then avoid paying out the claim, regardless of whether the non-disclosure or misrepresentation was an innocent one. The Act now places the duty to gather information on the insurer instead, requiring the insurer to request from the consumer any material information needed to assess the risk. The consumer’s new legal duty is to take reasonable care not to make a misrepresentation to the insurer. Consumer’s Duty to Take Reasonable Care Not to Misrepresent Even though the insurer now has the duty to ask for relevant information from the consumer before an insurance contract is entered into or amended, the consumer must still take reasonable care to not make a misrepresentation. A misrepresentation can include the failure to respond to a request to confirm or amend information previously given. The standard of care required is that of a reasonable consumer. Whether a consumer took reasonable care or not will be determined in light of all relevant circumstances. The Act lists several circumstances that can be considered when making a reasonable care determination, including: − The type of consumer insurance contract and its target market − Any relevant explanatory material or publicity produced or authorised by the insurer − How clear and how specific the insurer’s questions were − In cases where the consumer failed to respond to an insurer’s questions, how clearly the insurer communicated the importance of answering those questions and possible consequences − Whether or not an agent was acting for the consumer In addition, whether the insurer knew or should have known of particular characteristics or circumstances about the consumer must be taken into account. Any dishonest misrepresentation will always be determined as showing a lack of reasonable care.  

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Basis of Liability Cover

Basis of Liability CoverLiability policies are offered in two forms and it is important to know the difference between these:

Occurrence coverage

This can be the preferable option for a business owner.  Cover is provided for a claim no matter when it occurs.  If the claim is reported today but the incident occurred several years previously, subject to certain conditions, the insurer should deal with the claim.  A good example is the mesothelioma claims which have been occurring recently when the ‘caused’ date (exposure to asbestos) is many years previously. Problems can arise when buying a business where the insurance cover has not been fully investigated and the insurance history has not been completely determined.  Claims can arise leaving the company with a liability that they did not expect and can ultimately cause the business to fail.

Claims made policies

Claims made policy will only react to claims made during the period of insurance.  After the insurance period, if the client does not pay the renewal, then cover ceases.  Some insurer especially providing life sciences insurance cover insist on claims made cover. To continue cover after the insurance period ends then tail cover (extended reporting period endorsement) can be requested. If you take out cover with another insurer having claims made cover then you must take out tail coverage.

We are happy to discuss your Liability Insurance queries with you – call us on 01707 883377 or email us on

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Liability Insurance Injury Claims

Liability InsuranceFrom the 1st April 2013, new regulations came into effect that change the way employers and public liability insurance injury claims are dealt with. If your business faces a claim with a value up to £25,000, the process in which it is dealt with has changed.  So how does this impact on your business?  This is the new protocol: 1) All personal injury claims must be reported to your insurer by the claimants representatives via an electronic portal (already carried out for Road Traffic Act claims since April 2010) 2) Three stages to the process are applicable with strict timescales and fixed costs payable at certain stages. 3) Once an insurer is notified, they have 30 days to admit liability in respect of employers liability claims and 40 days for public  liability claims. 4) If contributory negligence is alleged, the case will fall outside the process and is expected to attract higher costs. 5) Under an employers liability claim the defendant has to provide details of earnings within 20 business days of the admission of liability.

As a policy holder, what am I expected to do?

Its advised to keep claims within this process so as to keep costs down.  To do this you will need to: – Notify anything you think will or may be a claim immediately.  If you are not sure, notify anyway (speak to your broker) – Obtain and gather as much information as you possibly can surrounding an accident or incident.  This is so an early decision can be made by your insurers and avoids the need for detailed investigations to be carried out by your insurers, incurring further costs. – Take an objective opinion of who is to blame and if there is only a small element contributory negligence, consider the cost benefits of an early admission to insurers against costs payable if the claims falls outside the process.

We are happy to discuss your liability queries with you – call us on 01707 883377 or email us on

  Image courtesy of Stuart Miles /

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