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Better late than never: Late payment of damages

Roger Franklin discusses the introduction of the Enterprise Bill 2015, which will place an insurer under a duty to pay policyholders with valid claims within a reasonable time

15 March 2016

Under the current law of England and Wales, a policyholder who has not been paid a valid claim by their insurer is entitled to sue for damages and interest, but is not entitled to damages for any further loss caused by the late payment of that insurance claim. This anomalous (and often unjust) aspect of insurance law is about to be changed by the introduction
of the Enterprise Bill 2015.

Under general contractual principles, if a party breaks a contract, then, subject to certain limitations, the other party may claim damages for the actual
loss suffered, provided it was foreseeable at the time the contract was made. What is foreseeable is defined as losses which (a) may reasonably be considered as arising 'according to the normal course of things', and (b) arise from any special circumstances that were communicated at the time the contract was made (see Hadley v Baxendale (1954) 9 Exch 341).

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