Insure and Sue

I often talk about the need to have insurance, which is not just limited to an actual insurance policy, but also includes the things that you can do (and avoid doing) to give yourself better protection in life.

For example, I’m a big advocate of things like pre nuptial agreements, shareholder agreements and contracts of employment, not because I think things will go wrong in your business and personal affairs, but because if they do go wrong, documents and preparation like that can be worth its weight in legal fees. It’s about hoping for the best but at the same time preparing for the worst. I often give the example of how you don’t buy buildings and contents insurance because you think your house will burn down, but because on the off chance that it does, not having insurance can be devastating to you.

Of course, in addition to having and doing things to be protected, I am also a big advocate of actual insurance policies, like property and vehicle insurance, and not just because it will be a requirement of your mortgage and the law.  Insurance is often good common sense as well as mandatory.  

Insurance policies are quite a hot topic in the legal press at the moment, due to the number of cases surrounding COVID and business interruption insurance. As most of you will have far better things to do with your time than read through the reports (as exciting as watching paint dry or waiting for the bar to open!) the bottom line is that the insurance companies are saying that clauses that covered what happened if you couldn’t access your business premises were aimed at if there was a bomb scare or a riot, something that would be over in a relatively short period of time. They hadn’t expected it to be used if you had to close down for weeks on end due to the pandemic, and they weren’t willing to pay out. The courts have disagreed, and most recently, AXA have been told they face a hefty pay out.

What I found most interesting about the law reports on the case (I bet you thought “interesting” and “law reports” were words you would not hear me say in the same sentence!) was reference to Mrs Justice Cockerill dealing with ambiguity in key words in the policy documents. When you consider how much time and money has been spent in drafting these documents, how are there ambiguities. Is this the insurance companies deliberately making things difficult so that policy holders will be less likely to bring claims or is this incompetence on behalf of those who drafted them.

In reality, I think it’s neither. My view (for what it’s worth) is that no matter how carefully you draft something, unless you have a crystal ball and know exactly what is going to happen, there is always a realistic prospect that events beyond everyone’s expectations will occur, and when you are trying to apply the wording of an agreement, even the benefit of 20/20 hindsight is going to let you down. That does not, of course, mean that I think contracts, agreements and policies are a waste of time. Far from it. However, it does mean that you should not rely on them 100% in the same way that having a good solid business relationship today does not guarantee that you won’t wish you’d done a shareholders agreement before you started your business. 

Kleyman & Co Solicitors. The full service law firm. Making even reports on cases involving insurance interesting, with the help of cute dog pictures!