INSURANCE 1.6 CLAIM PROCEDURE
Utmost Good Faith: requires that the insured must abstain from making false claims. He should not tender false evidence or exaggerate claim. In Galloway V Guardian Royal Exchange ltd, the court held that the exaggeration vitiated the insured’s claim. In Another case, backdating cover amounted to fraud.
:: Notice: where the insured peril occurs, the insured should first notify the insurer within a reasonable time. It may be written or unwritten. Except the parties agree otherwise. Notice to the authorized agent of the insurer is notice to the insurer-Section 54 Insurance Act 2003. Where the insurer proceeds to investigate the issue with knowledge of breach, he may be deemed to have waived the requirement of notice.
The parties may stipulate a time limit for notifying beyond which the insurer can escape liability-In Cassel V Lancashire and Yorkshire Accident Insurance Co, 14 days’ notice was required but notice was given 8 months after the incident. The court held that the insurers were not liable.
The insured should additionally notify the police in criminal cases. Section 71 of the Insurance Act dispenses with the need for police report in motor accident cases unless such accident occasioned death, serious bodily injury or in the case of car theft.
:: The next step is to supply particulars of loss: In Welch V Royal Exchange Assurance, the court held that failure to furnish particulars of loss and details of bank account despite various requests by the insurance company vitiated the insured’s claim.
:: Substantiate claim and prove loss: The burden of establishing loss lies on the insured.
:: The next step, (where available) is Arbitration: The court in Scott V Avery noted that parties may stipulate that their disputes shall be first heard by an arbitrator. Thereby making arbitration a precondition to litigation. Birds noted that an arbitration clause cannot apply where the question touches on the validity of the contract. Like where one party alleges that it is void, avoided or inexistent.
:: Measurement of loss: Loss may be total or partial. A loss is total where the subject matter is so damaged or destroyed and cannot be used. In such case, the insured get the market value of the goods at the time and place of the loss (i.e. the second-hand value). In the case of partial loss, the insured gets the cost of repairs depending on the nature of loss and facts of the case-Reynolds V Phoenix Assurance Co. The insured cannot recover more than his loss except in the case of a valued policy. Although inflationary trends tend to frustrate the process as was seen in Re Wilson and Scottish Insurance Corporation where the price of the car rose from E250 in 1915 to E400 in 1919 when the car was destroyed by fire.
Section 69 mandates the insurer to pay the claim not later than 30 days from the judgment whether or not the insurer would be entitled to avoid the contract or has already avoided it. Provided the insurer was notified within 7 days from the bringing of the proceedings.
Valued policy, an agreed amount is to be paid irrespective of the actual loss. The premium here is usually higher. In the case of partial loss here, the amount recoverable is the difference between the market value before and after the loss multiplied by value insured, divided by value of property. I.e. Depreciation x Value insured / Value of property.
Excess and Franchise Clause: Excess clause stipulates that the insured bears a certain amount or percentage of any loss. Franchise Clause relieves the insurer completely from liability where the loss falls below a certain percentage or figure.
Reinstatement: The insurer may have the option to reinstate. This has been provided for by Section 66 Insurance Act in respect of fire insurance where the money paid out is expended towards reinstating or repairing the house.