Enterprise Bill [HL]
Debate between Lord Lea of Crondall and Baroness Hayter of Kentish Town
Lord Lea of Crondall
I spoke to some of those people yesterday and the general tone of their remarks was that they did not feel as strongly about this issue as they did about some of the other comments that Lloyd’s has made. They did not want to be quoted as being on the opposite side. That was the message I got from them.
Baroness Hayter of Kentish Town
My Lords, like the noble Baroness, Lady Noakes, we cannot support Amendment 61 as it would enable an insurer to rely on the fact that it is had received legal advice to bolster the reasonableness of its position where a consumer had sued for an unfairly refused or delayed claim. However, it would not have to disclose the contents of the advice to the court, as the noble Baroness said. We consider that this would be an unbalanced tussle between the insurer and the insured.
Surely, if insurers refuse to make the content of their legal advice public, they must set out their other grounds for any delay without relying on their legal opinion. That should be sufficient for courts to assess, objectively, whether the grounds for delay were reasonable in the circumstances. It would be slightly absurd to allow an insurer simply to say that it had received legal advice saying that its grounds for dispute were reasonable, without requiring it to disclose the substance of that advice. Indeed, it would put insurers with deep pockets to obtain expensive legal advice in an unfairly strong position compared with the policyholder.
The House will be aware that the Law Commission takes a similar line to ours on whether an insurer’s defence to a late payment being that it had “reasonable grounds” for disputing the original insurance claim could be bolstered by the assertion that a lawyer told it that it had such grounds. In the Law Commission’s view, whether the insurer had reasonable grounds is an objective question based on the grounds themselves, not on a lawyer’s letter. Indeed, the mere fact that it had received legal advice would have no evidential value. Surely, an insurer should not need to rely on its legal advice to prove the reasonableness of its position. Furthermore, it seems only fair for any such legal advice to become disclosable where a party wants to rely on the fact that it has received it to bolster the reasonableness of its position.
On Amendment 62, as has already been made clear, the Law Commission has written extensively on limitation periods. I have to confess that two colleagues present tonight have read all that in more depth than I have. During the insurance law project, the Law Commission considered recommending a special limitation rule in respect of late payment of insurance claims when it accepted that insurers with many claims would need certainty about when they could close their books on a claim. At that point, the commission decided that that was not the right way forward and that it was more consistent to recommend the application of general limitation laws. It said at the time that special limitation periods in particular circumstances add unnecessary complexity which can lead to further confusion and can disadvantage claimants.
Despite this, the commission, perhaps along with the noble Baroness, Lady Noakes, has some sympathy—the emphasis being on “some”—with Amendment 62, which sets out a measured change to the limitation period to give insurers more certainty about when they might close their books, knowing that their liability had been fully satisfied in relation to a particular claim. Although this could have the effect of shortening the limitation period for policyholders, possibly to their disadvantage, the commission also acknowledges that it is not an unreasonably short period and might even give insurers an incentive to make payments more quickly to start the one-year period rolling and we hopefully close that file.
We hear those arguments but remain to be convinced that this amendment is necessary, as we have seen no evidence of likely detriment, only assertion of it. We were particularly concerned that the Law Commission concluded that Amendment 62 would not “materially undermine” policyholder rights. That sounds a bit like some undermining of policyholder rights. Therefore, we look to the Minister to provide assurances on this point, should the Government be minded to consider this amendment further.
I am aware from what the noble Lord, Lord Flight, said that the insurers very much support this measure. Well, they would, wouldn’t they? I have not heard the same from policyholders. We agree that there is some sense attached to Amendment 62—although not to Amendment 61—although I think a little more evidence still needs to be produced before the Government take that fully on board.