Full Disclosure: The Insurance (Miscellaneous Provisions) Act 2022 (Ireland)

Introduction

On 7 July, a commencement order was published in respect of the Insurance (Miscellaneous Provisions) Act 2022 (the “2022 Act”). The 2022 Act is tidying-up legislation which makes a handful of amendments to the Consumer Insurance Contracts Act 2019 (“CICA 2019”), along with the Central Bank (National Claims Information Database) Act 2018 and the European Union (Insurance and Reinsurance) Regulations 2015 (SI 485/2015).

The principal changes made by the 2022 Act are to the claims handling provisions of CICA 2019. The 2022 Act separately places obligations upon the Central Bank of Ireland (CBI) by requiring it to:

• Report to the Minister for Finance on the CBI’s efforts to prohibit so-called price walking (charging renewing customers a higher premium than new customers with the same characteristics, sometimes referred to as charging a loyalty penalty).
• Ensure that the records maintained by the CBI in its National Claims Information Database are accurate by giving the CBI additional powers to gather information from insurers regarding deductions to sums paid out in claims.

The 2022 Act is being applied over the next few months on a staggered basis, with some provisions coming into force immediately.

CICA 2019: claims handling – mutual duties of disclosure (including expert reports)

The 2022 Act alters the claims handling provisions of CICA 2019 by making notable tweaks to the mutual duties of disclosure placed upon consumer and insurers. S. 7 and part of s. 8 of the 2022 Act expand upon the current disclosure requirements of CICA 2019 (which came into force in September 2020) by deleting s. 16(10) of CICA 2019 and replacing it with a new section: s. 16A.

CICA 2019 currently requires any insurer or consumer who becomes aware of information “that would either support or prejudice the validity of the claim made by the consumer” to disclose that information to the consumer or insurer (as the case may be). The mutual obligation to disclose information pursuant to s. 16(10) of CICA 2019 specifically included information that would otherwise be subject to legal privilege. 16A of CICA 2019 maintains the requirement of mutual disclosure of information that would support or prejudice the validity of a claim made by the consumer. However, the new section provides far greater detail as to what “information” means in this context, now providing that the concept of “information” extends to “non-factual information”.

S. 16A of CICA 2019 provides that where such information is contained within a report prepared on the consumer or insurer’s behalf with a view to maintaining or defending civil proceedings, and which was (i) obtained for the purposes of assessing the validity of the claim, or (ii) contains information which either supports or prejudices the claim, the report (as opposed to only the information contained in it) must be disclosed to the other side no later than 60 days of receipt of the report by the insurer or consumer. This duty to disclose extends even to draft reports. For the purposes of s. 16A of CICA 2019, a report is defined as document or letter (electronic or hard copy) prepared by “an accountant, actuary, architect, dentist, doctor, engineer, occupational therapist, psychologist, psychiatrist, scientist or other expert”.

The new provision specifically states that, despite the fact that such a report is prepared for the purposes of pending or contemplated civil proceedings, a claim of of litigation privilege may not be maintained over it. However, the new section specifically notes that the concept of legal advice privilege is maintained, and s. 16A(3) of CICA 2019 provides that the duty of mutual disclosure of reports does not apply to reports prepared by a lawyer, in addition to any communication between a lawyer and “another person” (rather than simply the lawyer’s client).

The logic behind the introduction of a specific rule requiring the disclosure of expert reports which contain even non-factual information that supports or prejudices the validity of the claim is presumably based upon a belief that earlier disclosure of such information will lead to quicker claims settlements without involving lawyers. However, in practice, the very opposite may well occur owing to the fact that lawyers appear to be better positioned to procure such reports.

Obliging an insurer to provide expert reports to the other party where that party themselves may well plan to engage such an expert themselves appears to run contrary to long-established High Court and Supreme Court jurisprudence around the exchange of expert reports, as applied in such cases as Harrington v Cork County Council [2015] IEHC 41 and Kincaid v Aer Lingus Teo [2003] 2 IR 314.

In High Court personal injuries matters, mutual disclosure of reports is required by the Rules of the Superior Courts (No. 6) (Disclosure of Reports and Statements) 1998 (SI 391/1998). However, this exchange occurs at the latter stage of the litigation process, and after exchange of a formal schedule of reports and witnesses so as to avoid surprises. Furthermore, the courts broadly permit parties disclosing their reports to the other side in circumstances where the other party does not have an equivalent expert to seek and obtain an undertaking (a so-called Harrington undertaking) from the other side to ensure that, by providing their reports, unfair advantage is not taken. The logic behind such undertakings is to ensure equality of arms in litigation. Otherwise, as noted recently by the Court of Appeal in O’Flynn v HSE & Ors [2022] IECA 83, “If the plaintiff’s expert reports are given to the defendant’s experts on a non-mutual basis, the obvious concern is that the latter will be best equipped to decide how to structure their reports so as to undermine the plaintiff’s experts”.

S. 16A of CICA 2019 comes into operation on 1 October 2022. After that date, insurers and claims handlers would be wise to consider extremely carefully their obligations under s. 16A before procuring any expert report. We would strongly recommend that any insurer contemplating obtaining such a report at the outset of a claim to first consider obtaining advice from a lawyer around their obligations, particularly where the facts of a claim are far from clear. At a minimum, a consultation with the expert who has been engaged should be arranged in advance to that expert furnishing anything in writing to the insurer. If the expert’s view is not likely to be friendly towards the insurer’s position, it may be best to request the expert to not proceed with their report. Similarly, care should be taken when gathering statements from witnesses, or views from investigators, etc., particularly where such persons are asked to provide “non-factual information”, such as their impression of the claimant or an opinion.

CICA 2019: claims handling – requirement that insurer discloses details of deductions from claims settlement

S. 8 of the 2022 Act inserts a second new section into CICA 2019: s. 16B. This new section obliges insurers to provide details to claimants (rather than consumers only) who are due to receive a payment in settlement of a non-life insurance claim details of any deductions made to the settlement payment, including any amounts paid to the State. The insurer is required to provide reasons for the deduction and details of the amount deducted to the claimant on a durable medium (i.e., in writing). The duty of insurers to notify claimants of such deductions and the reasons for the deduction do not, however, apply to monies payable to the State in accordance with Part 11B of the Social Welfare Consolidation Act 2005 (as amended by s. 13 of the Social Welfare and Pensions Act 2013), which regulates the Recovery of Benefits and Assistance (RBA) scheme.

S. 16B of CICA 2019 comes into operation from 1 January 2023. Insurers may wish to update their standard letters ahead of that date to ensure that details of any deductions from a claim settlement be provided to the claimant as a matter of course, along with the reasons for those deductions.

 Claims handling (proportionate remedies) under Consumer Insurance Contracts Act 2019: amendments to (yet to be commenced) provisions designed to protect innocent co-insureds

The 2022 Act tweaks s. 18(4) of CICA 2019 (the only provision of CICA 2019 which is yet to be commenced) to ensure that the wording of the legislation better reflects the original intention behind its inclusion in CICA 2019. As per the Law Reform Commission, the aim behind s. 18(4) of CICA 2019 was to ensure that where a policy of insurance excluded coverage for loss or damage to property caused by a criminal or intentional act or omission by an insured, and where two or more persons were jointly insured on that policy, the insured wrongdoer’s actions would not be imputed upon the innocent co-insured, prevent that innocent co-insured from making a valid claim.

The traditional rule provides that where a policy of insurance held jointly, the insurer is entitled to exclude any claim in respect of any loss or damage caused by a criminal or intentional act or omission by any insured or beneficiary of a policy, even where that insured or beneficiary was not the party who committed the wrong. For example, where it is established that a married person intentionally destroyed jointly held property without the knowledge of their spouse, both the wrongdoer and their (innocent) spouse would be prevented from recovering under the policy.

Recognising the potential for injustice, s. 18(4) of CICA 2019 (as originally worded) was drafted to ensure that where a criminal or intentional act occurred that resulted in a loss of property, an innocent insured would not stopped from making a valid claim solely because of their relationship with the wrongdoer. Accordingly, insurers would only be entitled to exclude claims by the person who caused or committed the intentional act resulting in loss or damage, or any other insured who aided or colluded in the act which caused the damage. However, as originally worded, s. 18(4) of CICA 2019 specifically limited the provision to exclude claims for loss or damage only to property. Furthermore, s. 18(4) obliged the innocent insured to cooperate with the insurer’s investigation of the loss, and specified that the innocent insured could not rely upon the subsection to recover more than their proportionate interest in the destroyed or damaged property.

S. 9 of the 2022 Act changes the wording of s. 18(4) of CICA 2019 as follows:

• The subsection has been re-worded to limit the operation of the provision to consumers only rather than “persons” or “insureds” generally (i.e. to exclude corporate insureds). However, it should be noted that the definition of “consumer” as under CICA 2019 includes traders, companies, or partnerships with a turnover of less than €3 million, along with any natural person not acting in the course of trade.
• The subsection now specifies that, for the purposes of s. 18(4) of CICA 2019, two or more consumers are each a co-insured where each of them both has an interest in the insured property and are insured against loss or damage to that property.
• The subsection further specifies that the effect of the provision shall not affect any other exclusions under the policy for property loss or damage caused by a cyberattack, terrorism, war, or nuclear attack.

The changes introduced by s. 9 of the 2022 Act were effective from 8 July 2022 and s. 18(4) of CICA now stands reworded. However, a date for commencement of s. 18(4) of CICA 2019 is yet to be fixed by the Minister for Finance.

The modifications introduced by s. 9 of the 2022 Act to s. 18(4) of CICA 2019 are broadly positive towards insurers, particularly as the amendments provide a great deal more certainty around the operation of the provision whenever it comes into force.

 Other changes

The 2022 Act makes some additional changes:

• National Claims Information Database

The 2022 Act makes amendments to the Central Bank (National Claims Information Database) Act 2018 to empower the CBI to include details in the National Claims Information Database (NCID) in respect of any deductions made by insures from amounts paid out on claims so as to better reflect the costs borne by insurers in dealing with those claims.

• Solvency II Regulations

The 2022 Act amends the European Union (Insurance and Reinsurance) Regulations 2015 (SI 485/2015). in relation to the temporary run-off regime, which was introduced to deal with the fallout from Brexit in respect of UK and Gibraltar-based insurers.

• Obligation of CBI to report to the Minister for Finance

The 2022 Act obliges the CBI to prepare a report to the Minister for Finance no later than 18 months from July 2022 on the effectiveness of the CBI’s efforts to quash price-walking and other practices.

Conclusion

Whilst the 2022 Act is an effort at tidying up legislation, the changes that it makes in particular to the rules around claims handling in CICA 2019 are not insignificant and will be of pressing concern to insurers ahead of the commencement of s. 16A of CICA 2019, scheduled for 1 October 2022, and, on 1 January 2023, the commencement of s. 16B of CICA 2019.

S. 16A of the 2022 Act provides welcome detail around the mutual obligation of insurers and consumers to disclose information and reports following a claim, along with clarity around the operation of rules of legal professional privilege. However, the provisions requiring the disclosure of reports appear to be ill-conceived. Particularly, the requirement to disclose even a draft report within 60 days of receipt by the insurer or insured without regard to litigation privilege does not reflect the reality of how claims are handled.

Insurers should exercise extreme caution when considering engaging an expert with a view to litigation, or gathering information via some other means, such as obtaining a report from a private investigator, or statement from a witness in the ordinary course of claims handling.