NON-STANDARD CLAIMS

Breach of warranty gives right to the insurers to void the contract and avoid the claim. Even considering the changes made in the Insurance Act, 2015 in UK, breach of warranty by an insured suspends the insurer’s liability under the insurance contract from the time of the breach, until such time as the breach is remedied. The insurer will have no liability for anything which occurs, or which is attributable to something occurring, during the period of suspension.

How much of the UK ACT will Judges in our part of the world will take into cognizance remains to be seen.

Even before the changes due to the 2015 act, in practice, insurers usually waive the breach if breach is merely technical in nature and has not contributed to or aggravated the loss. Loss was treated as NON-STANDARD CLAIM.

Penal premium was charged and/or only a percentage (say 75%) of the payable loss was paid.

EXGRATIA CLAIM

These are claims paid as an act of grace. (I know many of you will say it is never act of grace but blackmail by insured or broker which leads to EXGRATIA CLAIMS).

Normally these are claims out of scope of the policy. For example, 9 laptops were covered but the insured had a theft claim of the 10th laptop which was missed to be covered.

EXGRATIA CLAIMS are paid as a percentage of the assessed loss. They are normally paid without precedent.

FOLLOW THE FORTUNES CLAUSE

In yesterday’s blog, I mentioned two versions. Version 2 almost makes it clear the Non-Standard and Exgratia claims are not payable by reinsurers if their permission is not sought before payment. Version 1 gives leeway to interpret that Non-Standard claims can be paid even without approval of reinsurers and reinsurers will follow the fortune.

In order to avoid doubt, many reinsurers add to the standard “Follow the fortune clause”-the following terms:

“Not Applicable for NON-STANDARD AND EXGRATIA CLAIMS”

Blog by Atmaram Cheruvu