Introduction
In the 2023 unreported case of OneBerry Lifestyle Pte Ltd v QBE Insurance (Singapore) Pte Ltd[1], the Singapore Court considered a claim brought by an insured luxury yacht owner (OneBerry) against an insurer (QBE) under, among other things, Section 13A of the United Kingdom’s Insurance Act 2015. In rejecting the insured’s claim under Section 13A, the Court found that the policy’s exclusion of liability for loss of use operated to exclude the Section 13A claim.
Background to Section 13A of the Insurance Act 2015
Section 13A of the Insurance Act 2015 was introduced in the United Kingdom by the 2016 Enterprise Act, a sweeping piece of legislation that introduced changes to a variety of commercial laws in the UK.
Section 13A was introduced to protect insured individuals and businesses from losses arising from their insurers taking an unnecessary amount of time to pay valid claims. The new legislation sought to fill a lacuna in the law which gave insureds the right to complain to the Financial Conduct Authority about late paying insurers and to claim interest[2], but no right to claim damages from them.
What does Section 13A do?
Section 13A implies a term into every contract of insurance[3] that requires the insurer to pay any sums due to the insured within a reasonable time. The obligation is triggered as soon as a claim is made by an insured,[4].
A “reasonable time” includes the time taken to investigate and assess the claim[5], and what amount of time is reasonable depends on the type of insurance at issue, the size and complexity of the claim, the insurer’s need to comply with relevant statutory or regulatory rules or guidance, as well as factors outside the insurer’s control[6].
Where an insurer disputes the claim, and has reasonable grounds to do so, the insurer is not liable simply by failing to pay the claim[7] (even if the insurer is found to be wrong in disputing the claim). However, the insurer’s conduct must be such that it took a reasonable amount of time to decline cover[8].
OneBerry Lifestyle Pte Ltd v QBE Insurance (Singapore) Pte Ltd
OneBerry owned a luxury yacht, which it insured under a pleasure craft insurance policy with QBE.
In February 2020 the yacht was struck by lightning whilst moored at Raffles Marina in the Northwest of Singapore.
OneBerry made a claim against QBE for various items of damage which it alleged were caused by the lightning strike.
At the time the claim was made the COVID-19 pandemic was worsening and on 7 April 2020 (during the course of the investigation into the claim) the Singapore government introduced its “circuit breaker measures”, which included requirements for remote working and restrictions on non-essential access to certain venues, including shipyards.
The COVID-19 pandemic, as well as other factors (which were the subject of the litigation), led to a delay in the assessment of the claim and OneBerry ultimately commenced proceedings in the Singapore High Court.
In addition to its claim for an indemnity, because the policy was governed by English law, OneBerry also claimed for damages under Section 13A on account of what it claimed was the unreasonable amount of time taken by QBE to assess the claim. OneBerry claimed damages for mooring charges, management fees and loss of use.
In rejecting OneBerry’s claim under Section 13A, the Singapore Court held in its brief grounds of decision that the policy’s exclusion of liability for “financial, emotional or psychological loss which occurs because you cannot use your Boat” excluded the claim (as pleaded) under Section 13A.
Contracting out of Section 13A
The decision of the Singapore Court is notable in that it appears to be one of the first decisions concerning an insurer excluding (or contracting out of) the obligation to pay within a reasonable period of time implied by Section 13A.
The term implied by Section 13A can only be excluded in certain circumstances. Under Section 16A of the Insurance Act terms in consumer insurance contracts[9] which would put the consumer in a worse position as respects any of the matters provided for in section 13A than the consumer would be in by virtue of the provisions of that section have no effect.
In the case of non-consumer insurance contracts (which the OneBerry’s policy was), Section 13A may only be excluded where: (1) the breach of that implied term is not deliberate or reckless; (2) where the exclusion clause was clear and unambiguous; and (3) where the insurer took sufficient steps to draw that exclusion clause to the insured’s attention before the contract of insurance was entered into[10].
The Singapore Court did not give detailed grounds for its finding that the “loss of use” exclusion applied and as such it’s not clear how it determined the issues in Section 16A.
Lessons for the insurance industry
This case is a salient reminder for insurers with policies governed by English law on the importance of efficient case handling.
In particular, by failing to assess claims within a reasonable time, insurers leave themselves open to claims for consequential loss arising from the delay and insurers may not be able to rely on traditional clauses excluding such loss to mitigate such liability.
In the case of non-consumer insurance policies, it is critical for any consequential loss exclusion that may limit the application of Section 13A to be clear and unambiguous and to be brought to the insured’s attention before the policy is entered into.
Further information
Please see our article on the English High Court case of Quadra Commodities S.A. v XL Insurance Company SE and Others [2022] EWHC 431 (Comm) for further information on the application of Section 13A[11].
Should you require any assistance with respect to the issues covered in this article, please do not hesitate to contact one of our lawyers.
[1] In which Samuel Sharpe and Justyn Jagger of this firm appeared for the insurer.
[2] In Singapore interest is generally payable on a successfully litigated claim at a rate of 5.33% from the date when the claim is filed with the Court.
[3] Incorporating the law of England and Wales.
[4] Insurance Act 2015, Section 13A(1)
[5] Insurance Act 2015, Section 13A(2)
[6] Insurance Act 2015, Section 13A(3)
[7] Insurance Act 2015, Section 13A(4)(a)
[8] Insurance Act 2015, Section 13A(4)(b)
[9] Being contracts of insurance between an individual who enters into the contract wholly or mainly for purposes unrelated to the individual’s trade, business or profession and an insurance company (see Section 1 of the Insurance Act 2015 read with Section 1 of the Consumer Insurance (Disclosure and Representations) Act 2012).
[10] Insurance Act 2015, Section 17(1)-(3).
[11] https://sjlaw.com.sg/section-13a-uk-insurance-act-2015-insurers-obligations-as-to-the-timely-payment-of-claims/
