Enterprise Bill [HL]

Lord Lea of Crondall Excerpts

Wednesday 25th November 2015 Lords Chamber

[Lord Lea of Crondall (Lab)]

My Lords, I congratulate the noble Lord, Lord Flight, on this further rear-guard action in his retreat towards Dunkirk with Amendments 61 and 62. He has now reached the sand dunes and is within sight of Dover, so I hope he can find a small boat on which to embark.

It is worth reminding noble Lords how many stages it has taken us to get to where we are with this whole question. The noble Baroness, Lady Noakes, and I were on the Special Bill Committee that followed the Law Commission’s report in the summer of last year. We did not report unanimously on the final outcome of the committee because she and I were in a minority—although not registered by votes—in saying that the Law Commission procedure, which means that if a matter is “controversial” it would not be taken forward in Parliament by a Special Bill Committee, translated into the fact that Lloyd’s of London had a veto over what Parliament could do in this case. I found that quite extraordinary. It is the first time that I have encountered such a procedure in a democracy and I hope that it is the last.

Happily, a year on, we are doing, in broad terms, what the Law Commission recommended in the first place. We should be dealing with the unadorned principle and with nothing else. I am not sure how far emails, which I have not seen, from the Law Commission saying what someone in the Law Commission thinks is part of parliamentary procedure. As far as I am concerned, the Law Commission procedure concluded a year ago. So I do not see how Law Commission emails are evidence, any more than a QC’s opinion. I echo the noble Baroness, Lady Noakes, on that matter.

Amendment 61 bears all the hallmarks of an attempt to introduce what the noble Earl, Lord Kinnoull, called “grit” into the system. This bit of grit is being introduced by the same constituency in the suggested provision, opening up a sort of litigation. I quote what the noble Earl said on 2 November. He said that a particular clause that he objected to could lead to more,

“disputed claims, leading in turn to … a lot of aggravation for the insurers concerned—in other words, grit in the machinery. That would naturally be less attractive to capital. Many factors decide where you want to deploy your capital as an insurance group, but I put it to the Minister that one wants to try to ensure that we do not have grit in the London machine, because any redirection of capital elsewhere would be damaging to the London markets”.—[Official Report, 2/11/15; col. GC 305.]

This has been the leitmotif of one particular part of the insurance market, of which Lloyd’s is, I think, 20%. It is the tail wagging the dog, as we all know. I was very sceptical when I saw the suggestion that we need to further accommodate the special pleading of Lloyd’s of London in its campaign against having late payments covered by the law of the United Kingdom, as they are elsewhere in the world.

On this point about the collapse of London, far from being against the interests of our competitiveness, the truth is totally to the contrary. I will also quote what I think everyone in the House will think is a reasonably pertinent piece of evidence given by the Law Commission—by Mr Hertzell—a year ago. He quoted from a publication called Commercial Risk Europe, which quoted,

“a risk manager of a global company operating in 28 countries and employing 9,000 people”.

This person,

“said of insurance generally, bearing in mind that his purchasing programmes are all around the world: ‘I agree that most claims are paid on time. The London market is a different story’”.

This person had a global perspective. He continued:

“‘Claims can be harder to deal with in London as you come up against 20 lawyers’”.

We have not had 20 tonight, but we have had one or two.

“‘The system is not working and a lot of European companies will not go to London any more because if there is a claim you are in deep trouble’”.

That is straight from the horse’s mouth on this preposterous supposition that following what is the normal legal process around the world of dealing with late payment will destroy the competitiveness of the London market. That special pleading patently must be rejected by any independent observer.

Amendment 62 seems to shift the balance in favour of an insurer, against the background that we have read in many pieces of evidence given to the Bill Committee that one year is a short period before the claim is settled. Three years is given as an average for some large claims. Perhaps the Minister has more research to bring to bear on this subject. However, I wonder why this issue is being put forward by Lloyd’s of London. That is a gift horse one might certainly look in the mouth. I think that—

[Lord Flight]

The noble Lord may not be aware that the measure we are discussing has the support of the Association of British Insurers, the London and International Insurance Brokers’ Association as well as Lloyd’s and, indeed, the International Underwriting Association, so it is not just Lloyd’s but the whole insurance industry that agrees with these points.

[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.