It is vital for businesses of all sizes to enjoy the protection of a robust insurance programme, suited to their specific needs, to make the financial consequences of an insurable loss at least manageable, if not totally avoidable. For smaller enterprises, a catastrophe-sized loss could bring an end to the business, because of its size and cash-flow implications. Larger businesses can ‘weather the storm’ but, nonetheless, face a serious dent in the balance sheet, and major uncertainty about the likely financial effect (and this may have to be mentioned in their public accounts), until the problem is resolved.

A real concern is that if a company does not go about procuring insurance in the right way, mistakes might be made and insurers might determine that the policyholder did not reveal the information that enabled underwriters to take a realistic view of the risk of a claim, with the result that they set aside the whole insurance (‘avoid’). Businesses also face the risk that non-compliance with a policy term will be fatal for a particular claim or series of claims.

Jan-Mar 2018 issue

Cubism Law