Frequently Asked Questions (FAQs)

What is insurance claims advocacy?

Insurance claims advocacy is the practical and strategic management of an insurance claim. It applies equally to all types of insurance and claim but is particularly valuable in matters of disputed or rejected insurance claims. In these circumstances specialist insurance industry and insurance market knowledge and skills can be invaluable.

Our insurance advocates are professionals qualified to bring a mixture of sound insurance market practice knowledge and commercial judgment to our clients' insurance claim problems. They will help assess the circumstances of your claim and will recommend a course of action to achieve optimum resolution and settlement.

Insurance advocates will recommend loss adjusters, forensic or other specialist consultants to provide the evidence and expertise that may be required to resolve a claim.

The advocate will also help you source, appoint and brief the right legal team according to the needs of the case.
The first priority of advocacy is to reduce the cost and impact to the client in favour of a commercially negotiated resolution. Insurance advocates are usually independent of any insurance company or intermediary so that there are no conflicts of interest that may prejudice the client's prospects of success.

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Isn’t insurance claims advocacy what loss adjusters and loss assessors do?

It’s not quite the same.  Loss adjusters are experts in quantifying the value of material loss or damage in relation to insurance claims, on behalf of insurers. They are distinguished from lawyers by the fact that loss adjusting is a qualification in its own right under the auspices of its own professional body. Loss adjusters are appointed by insurers to act as their coal face advisers and investigators. Loss assessors have a similar role but they offer it to the insured / policyholder to counterbalance the expertise of the insurer’s loss adjuster.  Again, loss assessors are predominantly concerned with the amount of a claim and negotiate the payout on behalf of the Insured.

Claims advocates advise at the strategic level of negotiating claims and disputed claims. A claims advocate might well engage a loss assessor to evaluate the amount of the physical loss or damage if that is an important part of a client’s claim. Equally, from time to time they might appoint a forensic accountant, a chartered surveyor or any other relevant professional who can offer reliable expertise on a specific matter relative to the claim, their relevant expertise contributing to the strategic plan and execution.

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Are you in competition with insurance brokers?

Absolutely not. Firstly, we are advisers to the British Insurance Brokers’ Association who refer its members to us when the broker's client has a claim dispute problem. Claims advocacy is not a mainstream insurance broking activity or a broker's core expertise and it would not warrant all but the very largest broking firms investing in people like us as full time employees. Insurance brokers can be in conflict in matters of their clients' insurance claims.  A lot of brokers are given authority by insurers to accept and bind insurances on the insurer's behalf.  This can put the broker in a conflict position if they encounter a claim dispute on a policy that they have accepted and bound as agents of the insurer. We are an ideal avenue of independent expertise to whom the broker and client can look for help in these situations.

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Are you in competition with lawyers then?

Once again, absolutely not. We have a considerable working knowledge of the law but we do not give legal advice.  We very often work alongside lawyers; they deal with matters of law and legal process and we are dealing with the application of commercial reality and settlement strategy. We have very good working relationships with lawyers because we add value to their services that reflect well upon them. In about two thirds of our cases we recommend the client to instruct a lawyer to look after their legal interests.  

This ensures that they are protected against the many and varied legal protocols that the courts now require to be strictly followed as a precursor to taking a claim to the courts.

We can bring to lawyers a working knowledge and expertise of insurance market practice which they do not have and can save them considerable amounts of time in gathering information on which to base their advice, the claim, the pleadings or the defence.

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Are there any other benefits to insurance claim advocacy?

Yes. Insurance advocates understand insurance practice and the law by which insurance is governed.  More importantly they know how insurers will react commercially to resolving a claim without resorting to litigation.  This can involve alternative dispute resolution (ADR) techniques which have gained considerable favour in the US and are gradually gaining weight and ground in the UK.

An effective starting point for a claims negotiation between two parties is to consider opening a "without prejudice" dialogue and proceeding to an early mediation in an attempt to avoid litigation and to settle the dispute/claim.  (See ‘What is mediation?’)  Being able to get to the bottom of the real issues in a claim or dispute will almost always reduce the collateral damage of that dispute both in terms of time, reputation, commercial risk and direct cost.

Insurance advocates’ first priority is to reduce the cost and impact to the client in favour of a commercially negotiated resolution that insurers (where applicable) will support because their interests and the policyholder's interests are ultimately the same, in reducing the ultimate cost.

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When is the best time to approach you as a claims advocate?

As soon as you find that things aren’t going the way you’d hoped.  If a claim appears to be stalling or is overly complicated, something is probably going wrong. It is better to get our advice as early as possible because undoing things is always more difficult than getting it right first time. 

Often the first sign of an impending problem is receiving a “reservation of rights” letter.  This basically says the underwriters are not throwing out the claim but they are reserving their rights to do so and they will let you know.  This can often be a stalling tactic, leaving you hanging in abeyance wondering what is going to happen next.  Unless you deal with that nothing may happen next in the hope that you will drop the claim and go away.

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As a claims advocate you are primarily concerned with managing problem claims but your knowledge and advice could be just as valuable to somebody buying insurance so that they can avoid the claims problem at a later date.  Is that right?

Spot on.  From time to time accountants, solicitors and investors refer clients to us, or seek advice from us themselves, about how to assess the risks inherent to a business.  This is particularly true of unusual or new types of business where the risks are not well known and/or where a business operation failure will have knock-on consequences for stakeholders and investors.

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If I notify a claim will my premium increase?

Whether or not your premium increases will depend upon the facts of the claim or potential claim. It will also include matters such as the potential cost of the loss or claim to insurers and the commercial aspects of the relationship between insurer and policyholder. Whether or not your premium might increase should not be a deciding point as to whether or not to notify. If it occurs to you that you possibly should notify then do so. It is best at this point to seek expert advice. This will determine what, how and when you should notify your insurers.

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What should I report/notify to insurers?

In principle you must report/notify your insurers of information that is material to the insurance. (See – ‘What is material information?’).

Some insurance policies require you to continue to notify insurers of material information after inception of the policy. Others do not. You will find out whether your insurance policy requires you to do so by reading the Conditions section of the relevant insurance policy.

 

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What is the material information I need to disclose to insurers?

Material information concerns facts that are known, or ought reasonably to be known, to the policyholder.  It is no defence to say that you did not realise that a fact was material.  It is also important to appreciate that an innocent misrepresentation has the same effect as a fraudulent one; the insurance policy can be voided, ab initio (from the beginning).

A material fact is one that would influence the judgment of a prudent underwriter in determining the premium and/or terms and conditions and/or whether he will or will not underwrite the risk.

An insurer need not elicit information by asking for it and the fact that the insurer does not specifically ask about a material fact does not discharge the proposer from its duty to disclose the information voluntarily.The consequences of misrepresentation and nondisclosure are very severe.  A policy can be declared void from the date it began (ab initio) so that both:

  • the claim that gives notice of a breach of utmost good faith can be declined;
  • any other claim made under the policy will be declined because the policy has been declared void ab initio.

There need be no direct connection between the loss and the misrepresentation or non-disclosure. Therefore even if the misrepresentation or non-disclosure has no bearing upon the claim itself, insurers can decline to provide indemnity and you would have to meet from your own resources the claim or loss uninsured.

Accordingly, any fact that would make a risk more severe or probable or likely to happen must be disclosed to the insurer.

Even if full and accurate disclosure would not, in itself, have decisively affected the insurer’s judgment about acceptance and premium, something that you misrepresent or fail to disclose may still be proved material.Once materiality is proved, the burden of establishing that the misrepresentation or non-disclosure did not induce the making of the contract lies with the policyholder party.

If the misrepresentation or non-disclosure of a material fact did actually induce the making of the contract, the insurer is entitled to render the policy void.  However, the court may require the insurer to demonstrate that this was so.

Unless the policy provides otherwise, the duty of disclosure continues up to the time at which the contract is made.  However, the duty then ends although any later changes that could take the risk outside the scope of the policy must still be disclosed.  However, a specific term in your policy may impose upon you a continuing duty to disclose, i.e. you must tell the insurer about any material change in your business during the term of the policy. The duty to disclose all material facts will arise again when the policy is due for renewal.

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Examples of facts that must be disclosed

No list of examples is exhaustive or definitive but examples of facts that are material (and should therefore be disclosed) include the following:

  • Facts that are associated with the unusual nature of property, i.e. not a standard (brick, tile/slate roof) construction, liable to flooding, proximity of other properties with hazardous potential.
  • Goods that are of high value, rare, in poor condition, are hazardous in themselves (i.e. explosive, contaminative or liable to cause injury to persons).
  • Geographical location, matters concerning environmental hazards, physical hazards.
  • Territorial jurisdiction, aspects of the risk that are outside the country of operation, e.g. outside UK jurisdiction, especially if it is USA/Canada jurisdiction.
  • Information about previous losses or claims.
  • Information about insurers who have declined or refused to renew an insurance policy.

Some facts that need not be disclosed

  • Facts that reduce the risk.
  • Facts of law (which are presumed to be known by insurers).
  • Facts within the insurer’s own knowledge (i.e. fact that a prudent insurer would be presumed to know about ordinary risks of the kind being insured).
  • Facts that the insurer would be expected to know from general knowledge of the world at large and from the class of insurance concerned.

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We hear a lot about insurers refusing to pay claims because of failure to disclose material information.  What is material information and why do they do it?

This is possibly one of the most vexing aspects of the entire commercial insurance world.  Here is a short and concise answer to a very big and complex question.

The contract of insurance is an undertaking to pay up to the sum insured under the policy in the event of specific and identifiable fortuitous events occurring. The underwriter (the person who accepts the risk for the insurer) will usually have a general knowledge of the kind of risks that he is willing to accept but, taking the case of a manufacturer or seller of goods, whilst they all have a lot of things in common, every business is essentially different in some meaningful way.  

More than 400 years ago, when underwriters first offered to insure the captains and owners of ships and cargoes against the perils of the sea, it became an established fundament of contracts of insurance that the proposer for insurance (the ship or cargo owner/captain) must tell the insurer (underwriter) everything they know about their risk that could have an impact on the probability and chance of it suffering loss or damage.  This founding principle was embodied in the 1906 Insurance Act and has remained law ever since.

There is case law in recent times that strongly reinforces this principle and, in simple terms, it says that you must tell an insurer of anything that may influence a prudent insurer’s judgment as whether to accept the risk and on what terms to accept it.

The problem that faces the buyer of insurance is that a manufacturing company’s accountant, company director or whomsoever is responsible for buying insurance has little if any real appreciation of what would affect a prudent underwriter’s decision and therefore it is almost impossible to be sure that all material information has been disclosed. And then comes the bad bit.  We all know that insurance is a grudge buy and there are, and always will be, some insureds who set out to cheat the insurers, deliberately not disclosing important information which would undoubtedly be material, on the basis that they would never get found out or if they do they will employ an expensive lawyer to fight their corner.  This dishonesty costs the insurance industry huge sums of money and so it is understandable that the insurers play a very tough game when looking at a claim for the first time to see whether their Insured has been honest and genuine in terms of disclosure of material information.

There is currently a review of insurance law and practice by the Law Commission and it was hoped by the insurance industry and the Association of International Risk Managers and Insurance Consultants (AIRMIC) that the matter of materiality would be reviewed, but it appears not.  The underlying problem for the insurance industry is that if you remove the obligation of the proposer to tell the insurer of things that may influence a loss or damage, i.e. a claim, then the insurer is put at such a disadvantage as they would have to withdraw considerable amounts of cover that they can give on the basis of trust reliant upon the principle of disclosure of material information.

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But why can’t the insurers make it clearer what they want to know?

That is a very good point and one that we had rather hoped the Law Commission might address. The question is where to start and how to start.  Insurers will say that they can’t possibly think of every question that they should ask.  Insureds will say, well, give us a clue.  We would say that in most areas of insurance, if not all, specialist underwriters have a very good idea of the things that concern them most and on the basis of “no surprises” would be able to offer a checklist of things to “direct the mind of the proposer to the mind of the insurer”.  Brokers can be enormously helpful in this because they see so many variations on any given theme. We know from our own experience that sitting with a client while he’s completing a proposal form is probably one of the most valuable things that the broker can do.  Thinking for your client is a really valuable service.

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What is meant by Reservation of Rights?

This is a term used by insurers to protect themselves against liability to pay a claim under a policy of insurance whilst they are still investigating the claim and whether it is covered.
The two most usual reasons for a reservation of rights are:

  • where the insurer suspects misrepresentation or non-disclosure of material facts

or

  • where the insurer suspects that a Condition or Warranty or Exclusion gives them a right to avoid paying a claim.

Reservations of Rights are very dangerous to policyholders and expert advice should be taken at the earliest opportunity. Insurers are able to rely upon reservation of rights only under strict legal circumstances, but policyholders are not made aware of this and it is easy for a policyholder to fall into traps in trying to establish certainty of cover.  If "Reservation of Rights" appears on the heading of or in the body of a letter then you should seek expert professional advice before replying to it.

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What is a Condition Precedent (to liability)?

In contract law a Condition Precedent is an event which must occur, unless its non-occurrence is excused, before performance under a contract becomes due.  In insurance terms, Conditions Precedent are often used in connection with claims notification clauses and also in connection with things that the insurer wants the policyholder to do or not do if they are to provide indemnity under the policy.  A Condition Precedent must be complied with unconditionally and absolutely.  If it is not the policy can be voided ab initio and therefore there will be no insurance protection, period.

Conditions Precedent are usually expressed as such (i.e. it is a Condition Precedent or it is a Condition Precedent to liability) in the policy and this will be found under the Conditions section of the policy.  Where such expression exists it is advisable to take advice at an early stage as to what are its implications.  They can be more severe than you may realise.

A Condition that is not a Condition Precedent may nevertheless be interpreted by insurers as a Condition Precedent, albeit wrongly and unfairly. However, it is also within the scope of judicial judgment that a Condition that is not expressed as a Condition Precedent can be interpreted by the court as being a Condition Precedent where the Condition itself goes to the root of the contract between the parties. Expert legal and insurance advice is required in dealing with Conditions Precedent.

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Can I expect my broker to support me with my claim?

This is a vexing question and it is becoming more common as the purchase of insurance has become increasingly automated by means of electronic trading.  The simple answer is yes, you should be able to expect your broker to assist you in making a claim under the policy.  The reasons are as follows:

  • It is part of a broker’s professional duty to do so.
  • It is presumed that you sought the advice of a broker because you needed expert help in relation to your insurance affairs which includes potential claims.
  • A competent broker will know more about insurance policies and coverage matters than a lay person.

However, some brokers specifically avoid anything to do with insurance claims for the following reasons.

  • They have no skills, resources or facilities.
  • Their profit margins do not allow for the cost of dealing with claims (for which they’re not separately remunerated).
  • The insurers they represent require them to hand all matters concerning claims direct to the insurer.

Some insurers give a broker authority to underwrite insurance policies on their behalf.

This means that the broker is acting on behalf of the policyholder in procuring the insurance but acting on behalf of the insurer in dealing with it.  This creates a nominal conflict of interest and can ultimately be to the disadvantage of the policyholder because the broker’s hands are tied by the simultaneous Duties of Care (in common law) and commercial obligations to the insurer as well as the policyholder.

It is important to find out whether your broker has specialist claims handling resources and the authority and skill to deal with claims.  If not, you should seek independent specialist advice and support.

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Can I say sorry to a client?

Most insurance policies strictly forbid you to admit or accept fault, blame, responsibility or moral or legal liability, expressly or impliedly, orally or in writing.

In simple terms, no, you cannot say sorry to a client or to a claimant.  However, commercially there is often a need to do so and there are means by which you can agree with insurers to conduct a negotiation that gives you an opportunity to reduce reputational loss or damage and/or maintain a contractual or other relationship with the party concerned.  This requires expert and independent advice of the kind we offer..

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Is the insurer on my side?

An insurer offers a policy of insurance under strict rules, terms and conditions.  They understand them very well, what is intended by them, how they operate and how they can be challenged, adapted and interpreted in law.  The lay policyholder is therefore typically at a commercial negotiating disadvantage unless they have the benefit of the experience of a competent broker or other independent adviser to assist them.

Very often insurers pass the responsibility for investigating and negotiating claims to loss adjusters (who are trained to investigate losses or claims on behalf of insurers) and/or to lawyers.  Generally speaking, loss adjusters are involved in property matters and business interruption and lawyers are used where the loss or claim concerns legal liability.  They mix and match according to need in each case.

A loss adjuster or a solicitor engaged by an insurer has a primary duty to the insurers to tell them whether the claim or loss falls within the terms of the policy, or not.  They will look for breaches by the policyholder of the supply of material information or for misrepresentation, for breaches of conditions or Conditions Precedent and will examine the exclusions of the policy to see if the claim is not covered by reason of any of the foregoing.

If all of those aspects are clear then the insurer’s agents owe a duty of care to the policyholder to ensure that the loss or claim is indemnified to the extent permissible by the terms of the policy.

In practice policyholders can quickly become confused as to whose side the loss adjuster, solicitor or other insurance company representative is on because of the tone and nature of written communication, the difficulty of having telephone conversations or of meeting and because of the complicated expressions and jargon that is often used in relation insurance and law.

If any of these things occur, you should seek independent expert advice.

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I am having difficulty understanding what my insurers are saying. Should I instruct a solicitor?

There are occasionally times when it is appropriate to instruct a solicitor but before doing so it is often better to consult an insurance advocate or other independent insurance practitioner.

Why?

First of all, insurance is a highly complex financial contract and the majority of general practice solicitors around the country would be unfamiliar with anything but the basics of insurance law and practice. 

The words and expressions in insurance contracts have special meanings and only specialist insurance lawyers, usually, understand the meaning and application of them.

It can be counter-productive to send solicitors letters to an insurer because the procedure adopted by the insurer is normally to consider the letter hostile and refer it straight to their own solicitors. This can set in motion a train of adversarial and unhelpful dialogue between lawyers that can lead to a ‘dug in’, entrenched positioning that reduces the probability of a negotiated outcome.

There are over 100 specialised insurance law lawyers in the UK ranging from the very largest international firms in the profession to small and medium sized solicitors usually located in the major cities. Many of these specialist insurance lawyers receive most if not all of their work from insurance companies instructing them on their behalf.  Very often these firms will not act for a policyholder claimant.

There are several claimant insurance specialists who do not have a conflict with the insurance companies because they are not instructed by insurance companies to act on their behalf.  Generally speaking these are the preferred lawyers to act on behalf of a policyholder. We are able to access and recommend these lawyers to our clients.

Within the specialism of insurance law there are further specialisms with lawyers who are expert in liability, or bodily injury, or motor, or business interruption or professional or corporate liability, for example.  Knowing who the experts are in a particular field and where to find them is a starting point to get the best result.  Before instructing a solicitor you should consult us.

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Isn’t insurance law very different from commercial law?

Yes and no.  Insurance law involves understanding how contracts of insurance are constructed and interpreted and there are meaningful differences from other more familiar aspects of commercial law. This is because a contract of insurance is a contract of indemnity based upon the doctrine of utmost good faith. That is where the differences from other commercial contracts begin.  Of course, case law precedent has also determined the outcome of thousands of cases over the last century and more.  There are lawyers who specialise in that and nothing else.

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Is it cheaper to go to an insurance advocate than to a solicitor?

It is not as simple as that. The cost is determined by the course of action not by the service itself.

Appointing a solicitor is best reserved for when the commercial routes to a settlement have been exhausted.

An insurance claims advocate can approach the insurers, directly, with a view to arriving at a commercially driven outcome. The insurance advocate is an insurance practitioner by profession and knows how the industry works and applies its own precedents and practices. The time and cost of doing this is low in comparison with the procedure and costs involved if a solicitor has to prepare a case and approach the insurers via another solicitor.

The solicitor is best suited to litigating a dispute over matters of interpretation of policy coverage or application by reference to legal precedent and /or statutory obligation. The cost of this process is front loaded with preparation to the standards required in law to prove a case in a court of law. Those costs are time based and ordinarily require a significant amount of research and work before any progress can be made. Furthermore, solicitors will always interface with other solicitors.

What are the fees?
Generally the fee charges of insurance claims advocates and solicitors are similar. The additional advantages of first seeking the advice of an insurance advocate are:

  • They can approach and negotiate direct with insurers in the first instance and this can bring a commercial aspect to the resolution of the claim.
  • They can work with the broker, where applicable, to add additional value to any influence the broker' has with insurers in resolving a claim, commercially and without resort to litigation.
  • They deal with a wide range of law firms and other professional specialists and they know the strengths, weaknesses and specialisms of each.
  • Insurance claims advocates can introduce you to two or three solicitors or counsel and assist you in selecting one that suits you.
  • Insurance claims advocates work alongside lawyers; the lawyers protect the client in respect of law and legal protocol to ensure that they do not prejudice their legal rights and remedies by failing to understand court procedure rules.  The insurance advocate advises the client and the lawyer on insurance market standards, practice, interpretation of policy wordings, proposal forms and the trick of the trade and industry.

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Can I use my own solicitor to defend a claim against my company?

The simple answer to this question is probably no.  The terms of the insurance policy will allow the insurer to take over and conduct the negotiation of a claim on behalf of you, the policyholder.  They have panels of solicitors and/or loss adjusters to whom they refer business because they know their standards, costs and history of success.

There are occasions when a policyholder is permitted to use their own solicitor.  These are rare and normally occur where the solicitor has a particular skill or knowledge relevant to the policyholder's claim.  However, you should not presume that you can use your own solicitor and should not instruct your own solicitor to act on your behalf and expect the insurers to pay for it.  Not only will they refuse to do so they may also regard it as a breach of a policy condition and therefore you will lose the benefit of insurance.

If it is important to you to be able to use your own solicitor then you should write to your broker/insurer and explain the reasons why and seek their permission to proceed.  This is a matter where you may benefit from our independent expert advice and guidance.

 

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Can you give a recent example of a case that embraces the benefits you’ve described?

We were introduced by a broker to its client, an engineering company operating mainly in the Middle East and Far East but resident in the UK.  A claim was made against the company in contract for a breach of contractual obligations in failing to repair parts of the structure that had not met their intended function.  Insurers refused to accept the claim citing their reason as the matters complained of were not covered by the definition of work covered by the policy. 

We read the available correspondence, policy documents and the contract and came to the conclusion that the claim ought reasonably to be covered by the policy having regard to the proposal form and submission which clearly set out the insured’s scope of work. 

Our knowledge of commercial law and contract immediately threw light on some key contractual obligations and conditions that would be influential to the outcome both of the original claim and what is covered under the insurance policy. 

We prepared detailed assessments and collated evidence which we combined into a report that was sent to the insurers with our reasons for requesting reconsideration of the claim.
We instructed lawyers to prepare a report referring to the law that supported our reasoning and conclusions.We presented our conclusions to insurers with a recommendation for a commercially arrived at and mutually acceptable outcome. It was accepted.                           

We saved the client an estimated £250,000 in legal fees. Our costs were less than £40,000.

A broker referred a client to us with a policy coverage dispute about the interpretation of how an exclusion clause would apply to a claim for a computer loss liability. We were able to show how the ordinary intention of the cover afforded by the policy was removed in its entirely by the misinterpretation of the exclusion clause as it was being applied in that case. We were able to show that the insured would not have bought a policy that contained such an exclusion because it would have had the effect of affording no cover under the policy at all. Insurers were persuaded of the argument, against the advice of their own lawyers, and the insured was given full indemnity under the policy.
In this case we prepared our report and opinions and invited the client's broker to present them to the insurer so as to preserve the integrity of the broker/insured/insurer relationship.

The value of the claim was £1.2m. Total costs incurred in settlement were less than £10,000.

A claim for loss caused to a business property by malicious damage was rejected by insurers because they asserted that damage caused was not within the term Malicious. They relied upon evidence of the cause of the damage which the insured asserted was unreliable.

Solicitors had been consulted to offer an interpretation of the policy but we were of the opinion that this approach was unlikely to succeed unless it went to court where the prospects of success were less than 50%.

We engaged independent loss assessors to evaluate the circumstances of the loss and in conjunction with additional specialist resources were able to rebut the reliability of the evidence relied upon by insurers.  With the assistance of solicitors sourced from our specialist network we presented the claim to insurers and negotiated a mutually satisfactory settlement.
The amount of the original claim was more than £400,000. Total costs incurred by the professional team we engaged were less than £50,000.

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