It's competition time with a bottle of bubbly for the best answer. We're looking for your opinion on a genuine case in which an insurer refused a claim. Waltham Pitglow gives you the facts

This week I have set a test which you can do just for fun or you may wish to submit it to us for judging in a competition with a bottle of bubbly as a prize for the best entry. The test is set as an application task.

We have talked much about knowledge and understanding of a subject, but what about the practical application?

This can often be achieved by actually completing a task against a checklist of a reasonably competent standard (for example carrying out a renewal meeting with a customer) or perhaps undergoing a role play with colleagues or external assessors in the same way, but in preference to a live meeting with a client.

Application can also be judged by the supervision and monitoring of files and records. However, we can also consider application by asking you to consider a set of circumstances (a case study) with the instruction that you should prepare an independent and unsupervised opinion.

Sailing school
To do this you must draw on your insurance knowledge and understanding and create a short report on which someone who is not an insurance specialist can rely.

On a scale of one to ten this following exercise would, in my opinion, be grade eight in terms of complexity and high value CPD of a structured nature.

Here are the circumstances (it is a real case but with the details simplified).

Mr K was a partner of a business that ran a small sailing school. That business was insured and had suffered three losses.

Loss one was a non-fault that occurred four years and 11 months prior to the date of quotation, but more than five years from the date of completion of the cover. No insurance claim was made. A full recovery was made.

Loss two was for under £300. Mr K was in control. No insurance claim was made.

Loss three was for £2,300 when the vessel was under the control of a Royal Yacht Club assessor two years prior to the commencement of insurance. Mr K was on board, but had no involvement with the voyage.

Mr K purchased a vessel for private use only and applied for a private small craft and the question on the proposal stated:

"Give details of any claims that have occurred in the last five years to vessels of which you are the legal owner or were under your control at the time of loss."

Mr K wrote: "None."

Three months into the policy (under which there was a £500 excess) a total loss occurred.

The insurer avoided the policy for a variety of reasons, but one of them was that the loss history was material and that the declaration "none" amounted to non-disclosure of material facts.

Legal owner
The insurer argued that despite the fact that the losses occurred under a business insurance, Mr K was the legal owner of the vessels that suffered loss because he was part of a was a partnership. So, according to the insurer, to answer the question correctly he was obliged to disclose these losses.

In court the underwriter, giving evidence, conceded that if the business had been a limited company, Mr K could not have been the legal owner of the vessels and the losses would not have to be disclosed.

To complicate matters, the broker used a master proposal, which asked for five years claims experience, but the printed proposal from the insurer asked for only three.

Your task is to help the judge in this case to understand market practice.

Here are the rules:

You must stick to your knowledge of market practice which includes Codes of Practice.

The insurer is a GISC member and an ABI member. This means that you can rely on what you believe would be the opinion of the body of practitioners within the industry, that is applying what you know and understand.

You must give your opinion and a short conclusion as to whether the insurer was correct in line with market practice, or not correct and why.

You must not quote the law or case law, that is a matter for the court.

You do not need to know anything about marine insurance. It is the insurance and market principles that you should focus on.

Your opinion may be as long or as short as you like, but the panel of judges will be looking for the quality of your submission and not necessarily the quantity.

And, if your opinion is that the insurer was correct, is that the end of the matter for Mr K?

"What", you may ask, "is the learning point of this exercise?"

The answer lies in a broker's duty to act in the best interests of a client. In the case of someone seeking to demonstrate high professional standards, this extends to being able to evaluate the rights and wrongs of a claim being reduced or rejected totally by an insurer.

It may be that such a reduction or rejection is fully justified, but remember that a broker arranges a contract of insurance for a customer and at law that contract has some standing.

Not only that (and particularly in relation to a private policy), codes of conduct and good market practice have some influence on the way an insurer - and indeed a broker - should act, with emphasis on fairness, something that the law does not necessarily recognise.

It may not be the contract wording or indeed any fair reason that provokes an insurer to pay less than the amount claimed, for example:

  • Insurer's profits

  • Bad attitude

  • Financial difficulties

  • Targets

  • Because they can pay less if no one challenges them.

    Just remember that if a broker cannot spot an insurer trying it on (and explain why), someone else might do just that after the event. And for up to six years, the less than competent broker might be at risk of an allegation of negligence by the customer.

    Entries should be received no later than 17 October 2002.

    If you are having problems the IT training team will reply to pleas for hints (by email only) up to midnight on 10 October 2002, see email address below.

    Email your work to the address below or send a hard copy to CPD editorial, at Insurance Times, 30 Cannon Street, London EC4M 6YJ.

  • Waltham Pitglow is an insurance investigator specialising in compliance.

  • This page is edited by RW Associates, specialists in training, competence and compliance. Email to: .

    Using this CPD page
    For the vast majority of practitioners and indeed support and supervisory staff in our industry, CPD is about regular learning and study that is planned, recorded, timed and evaluated.

    If you are a member of a professional body with a CPD requirement, there will be certain rules regarding the quality and nature of study material, and the way in which it is recorded.

    For staff of GISC members this means recording on your individual training file what the learning was, who provided it and when.

    It might be structured, such as a course, a learning programme or exam study. But it can be unstructured. This form of study encompasses reading the trade press, technical material or taking part in activities to support your professional body.

    Some CPD requirements are points related (a little antiquated) and others require a time value to be allocated.

    For example, it might take one hour to read Insurance Times each week. Most of that could be put as a time value but, in reality, perhaps only an half hour was devoted to learning something. The rule is to be honest with yourself and record the time that is relevant.

    Always take time to make a note of what you felt you gained from the activity. This is useful information for anyone else considering the same activity.

    In response to the popularity of our CPD programme each week's CPD page can now be downloaded from our website.

    We will be preparing a binder for you to keep these in alongside the results of the exercises.

    To download a PDF of this article as it appears in the magazine click here .

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