Enterprise Bill [HL]

Baroness Hayter of Kentish Town Excerpts

Wednesday 25th November 2015 Lords Chamber

[Baroness Neville-Rolfe]

My Lords, during Second Reading, noble Lords expressed concern at the Government’s intention to include the Equality and Human Rights Commission in the business impact target. They felt that it would put at risk EHRC’s international accreditation as an “A” status national human rights institution. In Committee, there was further debate regarding the EHRC’s international accreditation and the effect of its activities on business. Since then, I have had a very constructive meeting with the noble Baroness, Lady O’Neill, chair of the EHRC, and her officials. That meeting showed that the Government’s and EHRC’s objectives were closely aligned. The EHRC indicated a very welcome desire to assess, and be transparent about, the impact that changes to its regulatory activities had on business, and to have those assessments validated by the independent Regulatory Policy Committee.

The Government have no desire for the EHRC’s inclusion in the business impact target to pose a risk, whether real or perceived, to its “A” status as a national human rights institution. The business impact target does not fetter the independence of the EHRC, or indeed any regulator, to make its own decisions in relation to the changes it introduces, but the Government have listened to the EHRC’s concerns and recognise the value attached to its international standing.

The amendments to Clause 13 and Schedule 2 amend the reporting requirements of the target for all regulators that are in scope. They will require regulators to publish required documents relating to the regulatory activities that they have undertaken in an annual reporting period, rather than providing them to the Secretary of State. Cutting this direct reporting link to the Government will both mitigate any risk to the EHRC’s “A” status and offer some comfort to other regulators that their independence is not at risk either. Vitally, it will deliver the Government’s objectives of transparency around regulatory impacts to business.

In addition, Amendment 37 removes the EHRC in particular from the duty to provide a Minister with certain information relating to the effect of the regulators’ code on the performance of its functions. We accepted, as a result of our discussions with the EHRC, that there may also be a risk here to its international standing and this amendment will mitigate that risk. I beg to move.

[Baroness Hayter of Kentish Town (Lab)]

I thank the Minister for introducing these amendments so clearly and for the discussions she had. As she made clear, the key issue is obviously the protection of the EHRC and excluding it from the requirement to report on the impact of the Regulators’ Code. As she said, we debated this at Third Reading of the small business Bill when she accepted its special case. I just ask the Minister to confirm that these proposals meet the aspirations that she set out at that point to eliminate all risk of the EHRC losing its “A” status.

We know that the EHRC has welcomed the amendments tabled today. It considers that they will deliver the Government’s intention of improving transparency while safeguarding its ability to carry out its statutory functions free from government control or direction. Also, the EHRC welcomes the Minister’s assurance that the commission will not be subject to the growth duty.

On Amendment 37, the commission seeks assurances that the new business engagement requirements will be proportionate, allowing for the existing engagement mechanisms such as its routine contact with business organisations and its two-yearly stakeholder survey to be used to fulfil these requirements wherever possible. Subject to those reassurances, which I anticipate that the Minister will be able to give, from our side we are happy to support these amendments.

[Baroness Neville-Rolfe]

My Lords, I am grateful to the noble Baroness for her comments. All risk in relation to the proposals in this Bill has obviously been dealt with; the accreditation or reaccreditation is a wider matter. We sought to take on board the will of the House and talked to the EHRC. We dealt with the provision we were worried about at Second Reading and tabled the first amendment, which, as I said, applies more broadly. As a result of the discussions, we also tabled Amendment 37 because we identified with the EHRC a further possible risk. Certainly, we plan to manage the arrangement in a proportionate fashion.

My understanding is that the EHRC has signalled that it is content, but if the noble Baroness has reason to think that that is not the case I am obviously very happy to try and sort things out with the noble Baroness, Lady O’Neill, again. My impression is that it is very pleased with the changes that we have made and the process that we have gone through.

--- Later in debate ---

[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.

[Baroness Neville-Rolfe]

My Lords, I am grateful to my noble friend Lord Flight for his comments and for the work done by the absent noble Earl, Lord Kinnoull. I am very grateful to my noble friend Lady Noakes for injecting realism into our discussion this evening. I agree that Clauses 20 and 21 are very important and overdue, and should improve London’s reputation, as the noble Lord, Lord Lea of Crondall, said.

The Government and the Law Commissions that first developed the clauses have been keen to find a solution which would satisfy all stakeholders, allowing the London market to support the provisions. I am grateful to the market for its continued efforts. The latest amendments proposed by industry stakeholders relate to the complex legal areas of limitation periods and legal privilege.

I will deal first with Amendment 61, but I should say at this point that the Government have more sympathy for Amendment 62, which I will come to. The starting position in both areas is that the default rules should apply unless there is a very strong justification for making special exceptions for particular circumstances.

Amendment 61 seeks to answer some insurers’ concerns that they will be forced to disclose legal advice they received in relation to the underlying insurance claim if they seek to show they had reasonable grounds for disputing that claim. Whether an insurer has reasonable grounds to dispute an insurance claim is an objective question, based on the substance of the grounds themselves rather than whether the insurer has received legal advice in relation to them. The insurer can establish these grounds without waiving privilege by setting out the grounds for dispute in its pleadings or by relying on the content of its correspondence with the policyholder.

Legal privilege is an important protection for parties, particularly during ongoing litigation. But the existing rules concerning waiver of legal privilege already balance the competing interests in the question of when legal advice should become disclosable. This amendment threatens to put policyholders at a disadvantage, which is not justified by a corresponding need on the part of insurers.

We have read the further legal opinion, which my noble friend Lord Flight kindly sent to me today. However, legal privilege is a complex topic which has been developed over the years by the courts and should not be changed in a specific context without very good reason. While I note all the work that has been done, the Government, like my noble friend Lady Noakes and the noble Baroness, Lady Hayter, are not convinced that such good reasons exist here. I therefore ask my noble friend to withdraw Amendment 61.

The Government have “some sympathy”, to pick up the wording quoted by the noble Baroness, Lady Hayter, with Amendment 62, which relates to limitation. Some insurers have argued that the vast number of claims they deal with on a daily basis means that they need to know when they have satisfied all their liabilities in respect of a certain claim. I agree that it does not seem unreasonable to expect a policyholder to bring a late payment claim within a year of being paid the substantive insurance claim or the final payment under it.

It appears that Amendment 62 would increase certainty for insurers without materially prejudicing policyholders. It might even have the effect of encouraging insurers to make that final payment, to commence the one-year period for any subsequent late payment claim and bring the matter to a close. If that were the case, it would, of course, be a benefit to policyholders.

To that end, I believe that the amendment at least deserves further consideration. I agree that the policy intention behind it might represent an improvement to the late payment clause, which could be in the interests of both policyholder and insurer. In the light of this debate, I would like to explore the details of this possibility further and to discuss it with all interested parties. In the circumstances, I hope my noble friend will not move Amendment 62.