Commercial insurance risk and liability review, February 2016

Birmingham Exeter London Manchester Nottingham
www.bjinsurancelaw.com
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Birmingham Exeter London Manchester Nottingham
www.brownejacobson.com
2
We have undertaken a comprehensive review of the common law, statutory and procedural changes that occurred during 2015 and, in the pages that
follow, we summarise some of the most important legal developments and look ahead to changes on the horizon in 2016 and beyond.
Our analysis of key insurance law developments includes commentary about some of the market uncertainty arising out of the Insurance Act 2015 (the
Act), with a particular focus on broker concerns. We are working with insurers and brokers to help them assess the impact of the Act on their business
processes and in the implementation of necessary changes. In the run up to the Act coming into force on 12 August 2016 we will continue to work closely
with our clients and contacts, but to keep in touch with our latest updates and access resources, please refer to our insurance portal, which you can
access here.
Our review covers other key developments in relation to professional indemnity, FI, D&O and corporate liability, employment practices liability, EL/PL
and construction. We have also summarised important developments in relation to TMT and cyber risks, costs, practice and procedure, and fraud.
If you would like to know more about any of the topics covered in our review, please feel free to contact me or any of the authors of the articles.
Best wishes
Jonathan Newbold
+44 (0)115 976 6581
jonathan.newbold@brownejacobson.com

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Page
Introduction 2
Index 3
Insurance law and regulation 4
Professional indemnity 10
Professional indemnity: legal profession 11
Professional indemnity: accountants 13
Professional indemnity: brokers 14
Professional indemnity: letting and estate agents 15
Financial institutions 17
Corporate and management liability 22
Construction 27
Employment practices liability 31
Health and safety, environmental, regulatory 37
TMT and cyber 40
General liability and motor 44
Fraud 50
Costs 57

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The legal development that has rightly dominated discussion in the
market over the past year is the Insurance Act 2015. The new Act is the
biggest reform to insurance law for more than a century and has a
fundamental impact on how insurances are placed and claims are
adjusted. The insurance industry is now digesting the implications of the
Act and trying to find a way through its many uncertainties, some of
which are explored in one of the articles that follow.
There are also some important regulatory consultations affecting
insurers with transparency of pricing at renewal and SME claims handling
under the spotlight.
All these developments clearly present challenges, but, once embedded,
should improve outcomes for policyholders.
Michael Howard
+44 (0)20 7337 1506
michael.howard@brownejacobson.com
In this section
Attempt to aggregate under SRA minimum terms rejected
Target Operating Model (TOM)
The Insurance Act – broker uncertainty
Office of Financial Sanctions Implementation
Move over mediation… here comes the OC
FCA consultation on pricing transparency
FCA concerns over SME claims handling
Enterprise Bill – late payment of insurance claims

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Attempt to aggregate under SRA minimum terms rejected
The dispute in AIG Europe Limited v OC320301 LLP & Ors [2015] EWHC
2398 (Comm) was between a large group of 214 claimants and AIG; the
professional indemnity insurers of the firms of solicitors the claimants
had retained. The court considered the aggregation provision (clause
2.5) in the SRA’s minimum terms and conditions (MTCs), in particular,
whether various claims against the solicitors could be aggregated so as
to be treated as one claim. AIG argued that the claims arose from
similar acts or omissions in a series of related matters or transactions. It
is the first decision specifically on clause 2.5 of the MTCs, many
aggregation disputes having been heard in confidential arbitrations.
Teare J decided that, on a proper construction of the aggregation
provision, the underlying claims were not to be aggregated as one claim.
Although the claims arose out of similar acts or omissions, the acts or
omissions were not in a series of related matters or transactions because
the terms of the transactions were not conditional or dependent upon
each other.
The decision provides a logical breakdown of the aggregation clause
which will of course assist in other matters. It will, however, make it
much harder to run aggregation arguments in the future. That said, AIG
has been granted permission to appeal and it is one to watch. Teare J’s
analysis focused only on transactions and it remains to be seen whether
the Court of Appeal imposes a more purposive construction of the
aggregation provision.
Helen Davis | +44 (0)115 976 6561
Helen.Davis@brownejacobson.com
Target Operating Model (TOM)
The London insurance market has recognised that it must adapt to
maintain its global position as a centre of insurance excellence. TOM has
been established as a core component of modernising the insurance
market, building on existing strengths, but adding an additional
dimension of enhanced technological support. It is expected that TOM
will establish a central Service Hub that will improve data collection and
processing services that will be shared across the various market
organisations. Any new technology purchased in the insurance industry
should be purchased with TOM in mind to ensure future compatibility.
London market insurers have been modernising and this programme will
ensure that infrastructure is in place to respond to the rapidly changing
commercial environment that now exists to enable insurers to respond
positively to the challenges that will be faced in securing future new
business. We shall monitor TOM’s progress and provide regular updates
as the programme develops.
Michael Howard | +44 (0)20 7337 1506

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The Insurance Act – broker uncertainty
With the Insurance Act 2015 (the Act) coming into force on 12 August
2016, the year ahead is likely to be one of the most significant that the
insurance industry has seen for some time. While there has already been
plenty of commentary on the Act over the past 12 months and a number
of insurers are already adopting its provisions in their wordings and
claims philosophies, our research has shown that there is still a good
deal of uncertainty and unease amongst brokers with regard to how its
provisions will be applied and whether all insureds will see the benefit.
While over 75% of brokers we have surveyed believe that insurance law
was in need of reform, only half consider the Act to be a good thing for
the broking industry. We think that this is a reflection of the fact that,
over the course of the next couple of years in particular, brokers will be
at the ‘sharp end’ when it comes to interpreting the terminology
introduced by the Act. By way of example, the Duty of Fair
Presentations’ focus on the knowledge of ‘senior management’ will
present challenges to brokers and their clients as the individuals who
form ‘senior management’ will differ between every organisation. There
is also likely to be uncertainty as to what constitutes a ‘reasonable
search’ and to what degree a broker’s own knowledge will be imputed
to a client. Even once all that information has been obtained, brokers
will face the unenviable task of presenting risks in a ‘reasonable clear
and accessible’ manner. Given these challenges, insurers that adopt a
transparent and cooperative approach with brokers are likely to gain a
commercial advantage.
Brokers have also expressed concerns to us that the ‘proportionate
remedies’ introduced by the Act could result in disproportionate
outcomes. This is particularly the case with regard to insurers’ rights to
discount claims payments as a result of a breach of the duty of fair
presentation, as even very small retrospective increases in the premium
can result in substantial discounts being applied to indemnity payments.
Indeed, only half of brokers surveyed thought that the new remedies
would make for fairer outcomes for insureds.
One of the most significant areas of uncertainty amongst brokers is in
regard to insurers’ approaches to contracting out. Our research has
shown that over 75% of brokers believe that a significant proportion of
the market will contract out of the Act, at least in part. This presents a
challenge for brokers as they will need to be confident that ‘contracting
out’ can be identified and that clients are properly advised of the
consequences. While the Act prescribes strict transparency
requirements, brokers will be assisted by insurers making their
respective approaches absolutely clear.
While there are clear causes for concern for brokers, some real positives
can also be found. For instance, we have found that over 80% of brokers
anticipate that the Act will improve information exchange between
insurers and their customers and that around 70% believe that the
provisions of the Act will reduce the number of claims rejected outright.
This is significant as improving information exchange and reducing the
number of claims rejected were two of the primary objectives of the
Law Commissions when drafting the Act.
In light of all the above it is unsurprising that one of the main themes
that we have seen in our discussions with brokers is that the Act will
increase the number of legal disputes. Indeed over 75% of those
surveyed consider this to be a risk, which is in direct contradiction with
the Law Commissions’ objectives. While the industry will hope that an
increase in disputes will be short-lived, the next few years may well
prove to be a bumpy ride.
Jonathan Newbold | +44 (0)115 976 6581

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Office of Financial Sanctions Implementation (OFSI)
Financial sanctions can impact insurers by either prohibiting the
provision of insurance to designated persons or in the form of asset-
freeze measures affecting the provision of funds (which will prevent the
payment of claims and/or other sums under insurance contracts).
As part of the Summer Budget 2015, the UK Government announced the
creation of a new unit within HM Treasury to help businesses understand
financial sanctions, and to deal with non-compliance. The OFSI is due to
be operational by April 2016.
How can insurers ensure compliance?
With the creation of the OFSI this year, the importance of compliance
with sanctions measures has never been so important. Therefore,
insurers should ensure they have the following processes in place:
 due diligence – reasonable enquiries to identify whether their
clients or claimants are Designated Persons. Brokers and agents may
be a useful source of the information required to perform due
diligence, but compliance cannot be delegated to them
 screening – undertaken on a regular basis and in particular when
quoting for a risk, prior to any claims payments being made and on
renewals
 training - designed to ensure that all employees, but especially
underwriters and claims staff, understand how sanctions apply.
Insurers should implement reasonable and proportionate systems and
controls to mitigate the risk of infringement of sanctions on a risk-
sensitive basis. There is no one size fits all.
Katie Kerry | +44 (0)115 976 6064
katie.kerry@brownejacobson.com
Move over mediation… here comes the OC
Lord Justice Briggs’ interim report, published in January, moots the
creation of a new stand-alone Online Court or ‘OC’. The bold vision is of
a litigation process that will dispense with the need for:
 paper
 lawyers
 and costs-shifting
The main objective is to do away with the scourge of disproportionate
legal costs. Briggs is plainly convinced that claims with a value of up to
£25,000 should naturally fall within the OC’s remit and in time, he
envisages cases over £50,000 being included too.
The OC seems likely to import a form of conciliation into its core
procedures. Once statements of case have been filed, a case officer will
conciliate with the parties by telephone or online and will also plan and
manage the dispute at that stage.
If cases do reach the determination stage in the OC, the role of the
judge will be much more investigative than it is today in the
conventional courts.
For would-be claimants, if the establishment of the OC proves an
effective success, the proposition is quite a seductive one. The most
interesting impact may be on the mediation industry. If the basic tenets
of the OC live up to promise, it is hard to see why claimants might
choose to mediate in future. Why indeed would they mediate when a
low-cost, online, quick, public sector system is available, which
guarantees a final determination and outcome at the end of the day?
It is not beyond the realms of possibility that, by 2018, the OC could
become the ADR process of choice for disputes up to £100,000.
Nik Carle | +44 (0)115 976 6143
Nik.Carle@brownejacobson.com

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FCA consultation on pricing transparency
Following market testing with consumers in 2014, the FCA published
proposals in December 2015 relating to the possible introduction of new
rules and guidance for insurers on being more transparent about the cost
of cover at renewal. The FCA’s stated aim is to encourage customers to
engage by comparing prices.
In summary, the FCA proposes to introduce:
 rules for insurers to disclose last year’s premium on renewal notices
 rules for insurers to identify and specifically prompt those customers
who have renewed the same product four times or more to
encourage them to shop around
 guidance on how insurers can improve their processes around
renewals to deliver greater clarity and better outcomes for
consumers; and
 guidance about records that insurers maintain to demonstrate
compliance, including a record of past premiums.
Within the consultation paper the FCA also reminds insurers of their
obligations to treat customers fairly when developing their overall
approach to renewal pricing and in their treatment of long-standing
customers. Insurers are specifically encouraged to think about steps to
support vulnerable customers at renewal.
The FCA is seeking feedback on its proposals by 4 March 2016. We would
welcome a conversation with you to discuss your views on the proposals,
before we submit a response to the FCA.
All responses will be considered by the FCA and finalised rules and
guidance are expected to be published around mid-2016, with a target
implementation date of 1 January 2017.
Catriona Lothian | +44 (0)115 976 6182
catriona.lothian@brownejacobson.com
FCA concerns over Small and Medium sized Enterprise (SME)
claims handling
In May 2015, the FCA published a review into the handling of insurance
claims for SMEs. The FCA’s findings did not make happy reading for the
SME insurance market.
The FCA conducted interviews and audits of insurers, intermediaries
(including MGAs) and loss assessors and concluded that:
1. the general perception of SMEs is that the quality of claims handling
is poor
2. there is often a lack of clarity over who and what is driving claims
outcomes
3. there are poor channels of communication between different parties
handling a claim and SMEs
4. ‘sums insured’ are often inadequate.
The most significant concern from the FCA’s perspective is that it found
SMEs were frequently not treated fairly. The regulator’s message is that
SME insurers need to more closely reflect the approach taken on
consumer lines.
The FCA expects all those involved with SME business to carefully
consider the report and it will be following up on it. Therefore insurers
and intermediaries should reconsider their business processes in the
light of FCA’s findings and implement any necessary changes as soon as
possible. Priority should be given to ensuring quality and consistency of
claims handling approach, the adoption of clearer communication
channels as well as processes which demonstrate oversight of third
parties involved in the claims process and ownership for claims
outcomes.

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Enterprise Bill – late payment of insurance claims
Introduction
Late payment is becoming a major problem for businesses. Where a
business has suffered an insured loss, such as a fire or flood, it is likely
to rely heavily on insurance. Any unnecessary delay in payment can have
significant impact on a business’s ability to continue or restart trading
after an insured event. Although the Financial Conduct Authority (FCA)
Rules require claims to be handled and settled promptly, any failure to
comply does not currently entitle a policyholder to claim damages for
late payment.
In mid-2015, the Enterprise Bill (the Bill) was introduced to Parliament
for consideration. If passed in its current form the Bill will add to the
significant changes being introduced by the Insurance Act 2015 (the
Act).
The Bill contains measures to introduce a legal obligation for insurance
claims to be paid within a reasonable timeframe. The Bill will provide a
non-exhaustive list of matters which may be taken into account when
determining what is a ‘reasonable time’ for payment in the particular
circumstances of the case. A reasonable time, we are told, will include
time to investigate and assess the claim. The Bill also provides that an
insurer with reasonable grounds for disputing the validity or value of a
claim, will not be in breach of the obligation.
The aim and impact of the Bill
The aim of the Bill is to:
1. Ensure that the law provides an incentive to insurers to pay
insurance claims within a reasonable period of time.
2. Give policyholders an implied contractual right to payment within a
reasonable period of time.
3. Allow policyholders to recover general damages where they suffer
additional loss because of the insurer’s unreasonable delay in
payment.
Comment
The Bill has received a mixed reaction with some in the insurance
market holding the view that all that will happen is that insurers,
through their terms of business, with suppliers such as loss adjusters,
Third Party Administrators (TPAs) and in some cases brokers, ensure that
any award of ‘damages’ for late payment of insurance claims be passed
on either in whole or in part to those responsible for the administration,
investigation and settlement of claims other than the insurer. This will
fuel an increase in premiums and insurance cost of those loss adjusters,
brokers and TPAs and see a development of E&O claims in that context.
However, in all events, insurers should ensure they understand what
length of time will pass the ‘reasonableness’ test and ensure their
internal claims handling guides and processes reflect this new risk.
The Bill is currently passing through Parliament. The only amendment to
date is the introduction of a one year time limit for the bringing of such
late payment claims, which should help to avoid long tail late payment
exposures. We will keep you up to date with developments.
Andrew Pieri | +44 (0)20 7337 1027
Andrew.Pieri@brownejacobson.com

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Against a background of continuing growth in the professional indemnity
insurance market, an unstable economy, and some uncertainty resulting
from the changes in wordings required by the Insurance Act 2015, the
courts have provided some welcome guidance over the past year on risk
management, the quantification of claims and recovery actions. A
sample of those cases is reviewed below, including an important Court
of Appeal decision on causation and an auditor’s case which may assist
with successfully limiting liability for a range of professionals.
Jim Hobsley
+44 (0)20 7337 1011
Jim.Hobsley@brownejacobson.com
In this section
Right result – in the end – Bank of Cyprus UK Limited v Menelaou
Contribution claims and Bowerman duties
Contractual causation test applies when there is concurrent
liability
Bannerman clauses upheld as effective disclaimers against third
parties
ABI/BIBA voluntary code of conduct
Competition and Markets Authority investigation into estate agent
practices
Property Ombudsman crackdown on poor practices

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Right result – in the end – Bank of Cyprus UK Limited v
Menelaou
The bank had a first charge over Mr and Mrs Menelaou’s home. They
owed the bank £2.2m. The bank consented to the home being sold for
£1.9m and agreed to allow Mr and Mrs Menelaou to buy a new home for
£875,000, that home to be in the name of their daughter on condition
that the daughter executed a first legal charge in favour of the bank,
securing that sum on the new property.
So far, so good. However, it emerged that the Menelaous’ daughter
knew nothing of the arrangement. Apparently, she genuinely believed
that her parents were making a gift to her of the new home and the
evidence established that proposition and the fact that her signature on
the bank’s legal charge had been forged. She made an application to the
Land Registry to have the register rectified on the grounds that the
charge was void as against her, it having been forged.
The judge at first instance agreed with her. He found that although she
had benefited from an unexpected windfall and that although the bank
had been defrauded, it was hard to see how he could fashion a remedy
for the bank against Miss Menelaou. Indeed, he was positively of the
view that the bank had a remedy – against the solicitor who had acted
(the senior partner of which was, coincidentally, Mrs Menelaou’s
brother) and failed to procure the security the bank wanted.
The Court of Appeal disagreed, as did the Supreme Court. They utilised
the equitable doctrine of subrogation and of an unpaid vendor’s lien.
That is, they found that as the money had in effect been stolen from the
bank by means of the forgery, it had never had valuable consideration
for its participation in the scheme. Accordingly, it was effectively
unpaid and entitled to exercise a lien over the title deeds to secure the
payment which it had made in order to facilitate the transfer.
Although the legal reasoning is complicated, the outcome is obvious and
sensible. It is simply a pity that it took three visits to court and three
years. It does not do the legal profession much credit to find lawyers
such as those who acted for Miss Menelaou taking formal legal
arguments that have little or no moral attraction and, frankly, sought to
keep the benefit procured by the unlawful conduct of others.
Alan Radford | +44 (0)115 976 6258
Alan.Radford@brownejacobson.com

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Contribution claims and Bowerman duties
Goldsmith Williams Solicitors v E.Surv Limited [2015] EWCA Civ 1147
Following a settlement with the original claimant, a defendant who
wishes to succeed in a contribution claim against a third party must take
care to establish the case with the same rigour that would be required
from the original claimant against the third party.
The surveyors’ negligent valuation for a re-mortgage caused the
claimant lender to advance more than the value of a residential
property resulting in loss on a forced sale. The solicitors acted for both
borrower and lender. It was common ground that the price paid on
purchase by the borrower was discovered by the solicitors, that it cast
doubt on the valuation and that it was not reported. The solicitors’
submission that the general duty to report to the lender non-
confidential information that “might cause the [lender] to doubt… the
valuation” (see Mortgage Express v Bowerman [1996] 2 All ER 836) was
overridden by the terms of the CML Handbook, failed in both courts. The
solicitors were in breach of duty.
The fact that lender had disregarded other similar information casting
doubt on the valuation was raised on causation by the solicitors. They
submitted that the lender’s underwriting guidelines had not been
disclosed and there was insufficient evidence that the missing report
would have made a difference. The trial judge rejected this, holding
that the solicitors should have adduced a positive case on the issue. The
Court of Appeal disagreed. It was for the surveyors to prove that the
report would have prevented the loan and as “…the Judge did not have
the evidence before him…” the solicitors’ appeal was successful.
Jim Hobsley | +44 (0)20 7337 1011
Jim.Hobsley@brownejacobson.com
Contractual causation test applies when there is concurrent
liability
In Wellesley Partners LLP v Withers LLP [2015] EWCA Civ 1146 the Court
of Appeal held that, in professional negligence claims where there is a
concurrent cause of action in contract and tort, the test for
recoverability should be the same and should be the more restrictive
contractual test (i.e. the type of damage which occurred must be within
the contemplation of the parties).
The court decided that the contractual test should apply, rather than
the wider ‘reasonably foreseeable’ tortious test, on the basis that the
parties have had the opportunity to draw special circumstances to each
other’s attention at the time of formation of the contract. Floyd LJ
concluded that, “It makes no sense at all for the existence of the
concurrent duty in tort to upset this consensus, particularly given the
tortious duty arises out of the same assumption of responsibility as
exists under the contract.”
Comment
This decision clarifies the position in relation to concurrent liabilities
and will be welcomed by defendants in professional negligence cases
and their insurers, as it means they are unlikely to be liable for unusual
but foreseeable losses.
That said, identifying cases where this new approach will lead to a
different result is difficult. Although the decision represents a
significant development on a point of legal principle, it may well not
have a material impact because there is scarcely any practical
difference between the tortious foreseeability test and the contractual
test as to what was in the contemplation of the parties at the time the
contract was entered into.
Tim Johnson +44 (0)115 976 6557
tim.johnson@brownejacobson.com

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Bannerman clauses upheld as effective disclaimers against
third parties
Auditors will welcome the decision in Barclays Bank plc v Grant
Thornton UK LLP [2015] EWHC 320 (Comm) where it was held that
disclaimer clauses in non-statutory audit reports produced by Grant
Thornton were effective to prevent a tortious duty of care arising to
Barclays.
In brief, Grant Thornton was engaged by Von Eessen Hotels Group
Limited (VEH) to produce consolidated non-statutory audit reports in
order to assist VEH to meet its obligations under the terms of its loan
facility agreement with Barclays. The non-statutory audit reports
contained disclaimer clauses which excluded liability to anyone other
than VEH’s directors (the standard ICAEW wording save for reference to
directors rather than members was used). It later transpired, after VEH
went into administration, that VEH’s financial director had manipulated
the financial records, which resulted in a loss to Barclays.
The issues before the court in granting summary judgment to Grant
Thornton were whether the disclaimer was sufficiently brought to
Barclays’s attention and the reasonableness of the disclaimer.
The court concluded that Grant Thornton had done everything to bring
the disclaimer to Barclays’s attention. Grant Thornton could not
“anticipate that any competent banker would fail to read the first two
paragraphs of a two page report”. On the question of reasonableness,
the court found that the disclaimer met the requirements of the Unfair
Contract Terms Act 1977 because:
a) Barclays was a sophisticated commercial party;
b) if Barclays had engaged Grant Thornton directly, they would have
been subject to a limited liability clause and therefore they would
be in a better position if the disclaimer was struck out; and
c) Barclays could have taken steps to protect itself.
Comments
The decision reinforces the clear intention behind Bannerman clauses.
However, the law still requires more when ‘boilerplate’ clauses are
buried in large documents which seek to exclude liability to
unsophisticated individual customers. There is therefore scope for small
companies or consumers to contend unreasonableness in future cases.
Marlene Henderson | +44 (0)115 976 6133
marlene.henderson@brownejacobson.com

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ABI/BIBA voluntary code of conduct
In May 2015, the British Insurance Brokers’ Association (BIBA) published
a voluntary code of conduct for its members. The code of conduct
followed extensive consultation with BIBA’s membership and provides
for four pillars of conduct. These are to:
1. abide by all relevant laws, principals and regulations;
2. act with integrity and honesty to all stakeholders;
3. act in the best interests of each client and to ensure that all
recommendations are based on a clear understanding of their needs,
priorities, concerns and circumstances; and
4. act with skill, care and diligence.
This code is a codification of BIBA members’ existing rules and
requirements that are enforced by brokers’ regulatory bodies.
Following publication of BIBA’s code, it has joined forces with the
Association of British Insurers (ABI) and published a joint code of good
practice in January 2016. The aim of this joint code is to provide
support to vulnerable customers when they renew their motor or
household insurance policies. This follows the FCA occasional paper on
consumer vulnerability published in February 2015. This paper identified
a number of risk factors that may lead to consumers facing vulnerability
when purchasing financial services.
This joint code is effective 1 January 2016 and a review will occur after
12 months to assess the influence it had on the treatment of vulnerable
customers.
Michael Howard | +44 (0)20 7337 1506

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Competition and Markets Authority investigation into estate
agent practices
On 10 December 2014, the Competition and Markets Authority (CMA)
announced an investigation into a Hampshire-based association of estate
and letting agents, Three Counties Estate Agents, which had been
accused of anti-competitive practices.
The allegations were that the companies who formed the association
had entered into an agreement which prevented them from advertising
their fees or any discounts in a certain local newspaper. In addition, two
specific members had made an agreement with another newspaper to
prevent any agents (including those who were not part of the
association) from advertising their fees or discounts in the paper. This
meant that potential customers were unable to easily obtain information
about fees and rates, and it also created problems for new entrants to
the market, since they were unable to assess and compare their
professional rates.
In March 2015, the three specific members of the association which the
CMA had been focusing on admitted breaching competition law, and
agreed to pay fines which collectively amounted to over £775,000 (a 5%
discount was awarded based on their early admittance).
In the wake of this, the CMA has sent out warning letters to a number of
agents which it had reasonable grounds for suspecting have been
involved in similar anti-competitive agreements.
Importantly, the CMA has also liaised closely with The Property
Ombudsman about this matter. The Property Ombudsman has now
warned members that failure to comply with such legislation may also
lead to expulsion from membership. This is of particular note to insurers
because if insured members are expelled from a redress scheme such as
The Property Ombudsman for failure to comply with competition laws,
they may leave insurers exposed to a higher level of risk and general
costs exposure when dealing with claims, since claimants will no longer
be able to pursue a claim via a free ombudsman service, but instead
through proceedings and formal litigation.
In light of this, insurers may wish to check the extent to which their
policies afford cover for such competition related liabilities and, if cover
is provided, give increased consideration to ensuring agents are aware of
their need to comply with competition legislation. Insurers should seek
confirmation in proposals whether the proposer has faced any
competition law inquiries in the past, and whether they believe
themselves to now be compliant with all relevant legislation.
Daniel Seely | +44 (0)115 908 4125
daniel.seely@brownejacobson.com

16
Property Ombudsman crackdown on poor practices
During 2015, the Property Ombudsman announced the expulsion of a
number of letting agents from their membership following upheld
complaints relating to poor standards and professional practices. One
such member was expelled for a minimum period of two years. The
complaints in question included: failures to deal with complaints, failure
to amend tenancy agreements or return deposits, unfair fees, and also
failing to provide documentation to the Ombudsman when requested.
Clearly, the failures in question are not uncommon criticisms in claims
which proceed to ombudsmen, and therefore this decision suggests
expulsion is a risk faced by all members.
These recent expulsions are of particular interest given the recent
changes in the law which require all letting and estate agents to become
members of a ‘Redress Scheme’ (such as the Property Ombudsman, The
Property Redress Scheme, or the Ombudsman Service). This decision
shows that while letting and estate agents are all required to join such a
scheme, the schemes are not themselves obliged to accept or retain
members.
Although the decision to expel members is not frequently made, the
potential consequences of an insured agent being expelled are severe
and can have a number of consequences for insurers.
From a claims perspective, the advantage of a complaint being heard by
an ombudsman is that it is a free service and there are no substantial
costs for insurers to bear. But if an insured agent is expelled from such a
scheme, claimants will no longer be able to pursue a claim through this
route, and instead their main route of redress will be through litigation.
This means that the potential cost exposure for claims is significantly
higher.
Daniel Seely | +44 (0)115 908 4125
daniel.seely@brownejacobson.com

17
The pace of increased regulation in the financial institutions sector in
the UK shows no sign of easing off, with 2015 once again heralding some
important changes to the regime for banking accountability in the UK. In
July, the Financial Conduct Authority (FCA) and the Prudential
Regulation Authority (PRA) published their final rules for the new
banking regulatory framework which is due to take effect on 7 March
2016, and which will include the senior manager’s regime (SMR) which
we cover in this section of the Review.
2016 promises to be another busy year for all those who are active in
the sector, banks, their insurers and their advisers alike, as the FCA
begins the process of consultation (CP15/43 published December 2015)
towards the implementation of Markets in Financial Instruments
Directive II (MiFID II) which is likely to come into force at a domestic
level in January 2017.
Derek Bambury
+44 (0)20 7337 1006
derek.bambury@brownejacobson.com
In the meantime the courts continue to grapple with a number of
challenging legal issues which are highlighted in many of the cases that
are being pursued, arising from past lending and hedging transactions in
which, depending on your perspective, the courts are being asked to
provide much-needed clarity on the correct construction and effect of
complex financial contracts, or to provide relief from the consequences
of market abusive practices, or mis-selling. Of particular interest is the
ongoing dispute in Crestsign Ltd v National Westminster Bank plc which
is expected to reach the Court of Appeal in April 2016, when the court
will be asked to consider, amongst other things, the issue of contractual
estoppel in the context of alleged SWAPs mis-selling. Watch out for our
blogs and bulletins over the next 12 months in this developing area.
In this section
New Senior Managers Regime for individuals in banking
New whistleblowing framework
Mis-selling claims – a shift in the claimant’s favour?
FCA consultation – increasing the scope of FOS

18
New Senior Managers Regime for individuals in banking
As part of the regulatory drive to increase individual accountability in
the UK banking sector, a new framework comes into force on 7 March
2016. It will apply to people at a number of ‘relevant firms’: UK banks,
building societies, credit unions, some investment firms, and branches of
foreign banks operating in the UK.
The new regime comprises three elements:
 Senior Managers Regime, for people who perform a senior
management function at a relevant firm, whether they are in the UK
or overseas. There are 17 senior management functions, which
replace the current significant influence functions and require
individuals to have prior approval from the regulators (the FCA and
PRA) in a similar manner.
 Certification Regime, focusing on employees of relevant firms who
could pose a risk of significant harm to the relevant firm or its
customers, for example investment advisers. Relevant firms will
need to certify that these individuals are fit and proper on an
ongoing basis.
 Conduct Rules, which are high-level requirements applying to senior
managers and certified individuals. For relevant firms, the conduct
rules will replace the existing Statements of Principle and Code of
Practice for Approved Persons. The FCA conduct rules will not only
apply to approved persons but to most employees of relevant firms
who are in the UK or have customers in the UK.
Applications for approval to perform a senior management function must
include a ‘statement of responsibility’, setting out the areas of a
relevant firm’s regulated activities for which the senior manager is
responsible. The regulators have specified the responsibilities that must
be assigned, according to the size and circumstances of the relevant
firm.
Relevant firms must also produce a ‘management responsibilities map’
describing the firm’s management and governance arrangements and
showing that responsibilities have been allocated without any gaps in
accountability. The regulators will require annual confirmation from the
relevant firm’s board that there are no gaps in the allocation of specified
responsibilities.
Catriona Lothian | +44 (0)115 976 6182
catriona.lothian@brownejacobson.com

19
New whistleblowing framework
Introduction
The FCA and PRA recently published new rules on whistleblowing to
complement their initiatives to change senior management arrangements
and remuneration in the financial services industry.
The rules will apply to UK deposit-takers with assets of £250m or
greater, including: banks; building societies; credit unions, PRA-
designated investment firms; and insurance and reinsurance firms within
the scope of Solvency II and to the Society of Lloyd’s and managing
agents.
The rules will operate as non-binding guidance for all other firms
regulated by the FCA or PRA.
Affected firms will be required to:
1. appoint a ‘whistleblowers’ champion’
2. put internal whistleblowing arrangements in place that are able to
handle from all types of person
3. provide training and development on whistleblowing including for all
UK-based employees, all managers of UK-based employees wherever
the manager is based and all employees responsible for operating the
firm’s internal whistleblowing arrangements
4. tell UK-based employees about the FCA and PRA whistleblowing
services
5. require its appointed representatives and tied agents to tell their
UK-based employees about the FCA whistleblowing service
6. inform the FCA if it loses an employment tribunal case with a
whistleblower
7. present a report on whistleblowing to its board at least annually.
Settlement agreements must state that its terms do not prevent the
person from making a protected disclosure.
A whistleblower is any person that has disclosed, or intends to disclose, a
reportable concern to a firm, or to the FCA or the PRA, or in accordance
with the Employment Rights Act 1996 (the Act).
A reportable concern is a concern held by any person in relation to the
activities of a firm.
Suggested actions
 appoint and train a whistleblowers’ champion in time for 7 March
2016
 allocate to the whistleblowers’ champion the relevant
responsibilities referred to
 give the whistleblowers’ champion access to appropriate resources
to ensure all relevant measures are introduced by the 7 September
2016 deadline.
Raymond Silverstein | +44 (0)20 7337 1021
Raymond.Silverstein@brownejacobson.com

20
Mis-selling claims – a shift in the claimant’s favour?
2015 has seen several small but palpable shifts in the attitude of the
judiciary towards a more favourable legal environment for those wishing
to bring mis-selling claims against banks.
Historically, customers have sued for damages for negligent
misrepresentation, breach of contract and/or negligent advice, many of
which claims are met with a defence of contractual estoppel; meaning
that parties who have signed standard contract documents containing
non-reliance clauses, are prevented from arguing that they relied on
advice from the bank.
In Crestsign Ltd v National Westminster Bank plc & another [2015] EWCA
Civ 986, permission to appeal has been granted on several points, one of
which is whether standard non-reliance clauses (which presently serve as
an effective bar to many mis-selling claims) should be subject to the
Unfair Contract Terms Act 1977. The outcome of the appeal (due to be
heard in April 2016) has the potential to make or break many of the mis-
selling cases, given that similar contractual limitations are found in most
standard agreements.
An alternative to the conventional court claim for misrepresentation was
provided by the FCA’s alternative redress scheme – the FCA Review.
However, not all customers have been content with the redress offers
made, and this is reflected in the fact that litigants have been seeking
alternative ways to seek redress in 2015 by attempting to open up new
avenues of litigation. Two examples are as follows:
1. R. on the application of Holmcroft Properties Ltd [2015] EWHC 1888
(Admin): The Administrative Court allowed an application to bring
judicial review proceedings in respect of allegedly mis-sold rate
swaps on the basis that the Independent Reviewer conducting the
FCA Review (KPMG) could be a public body. The hearing is expected
to take place in early 2016.
2. Suremime Ltd v Barclays [2015] EWHC 2277 (QB): In February 2015,
the previously undisclosed FCA Review agreement between the FCA
and Barclays was published. This led to Suremime seeking to amend
its mis-selling claim against Barclays to include three new claims for
alleged breach of contract and/or negligence in conducting the
redress scheme. The Mercantile Court gave permission to the
claimant to advance the claims in tort, as they were more than
merely arguable. If the outcome of this claim is successful, this will
open up an entirely new avenue for customers who delayed bringing
a mis-selling claim in the hope that the FCA Review process would
provide satisfactory redress. Again, this is one to watch in 2016.
As can be seen, the banks have thus far maintained their position that
neither they, nor the Independent Reviewer, owe any civil/public law
duties of care to those alleging wrongdoing because of the contractual
disclaimers referred to above, and the structure of the FCA Review’s
framework. However, considerable litigation seems set to continue over
interest rate swaps in 2016, and only time will tell whether the banks’
position will stand up to judicial scrutiny.
Derek Bambury | +44 (0)20 7337 1006
derek.bambury@brownejacobson.com
Helen Edwards | +44 (0)115 976 6168
helen.edwards@brownejacobson.com

21
FCA consultation – increasing the scope of FOS
The FCA has published a Discussion Paper (DP) to review the way in
which small and medium size enterprises (SMEs) that use financial
services are treated in its rules. The DP follows a number of issues with
the way some financial services firms have treated their SME clients, and
the provisional findings of the Competition and Markets Authority (CMA)
into retail banking.
At present, only SMEs with a turnover of €2m and less than 10 employees
can take complaints to the Financial Ombudsman Service (FOS).Those
other SME businesses that are unable to do so account for a considerable
share of the sector’s demand for financial services.
The FCA is seeking views on, whether:
 the current level of regulatory protection for SMEs is broadly right;
 its rules should provide more SMEs with greater protections,
including access to FOS;
 the amount of redress FOS can order financial services firms to pay
should be increased from its current limit of £150,000;
 more ambitious voluntary standards could complement, or provide an
alternative to changes to its rules; and
 they should issue guidance to firms on particular aspects of their
dealings with SME clients.
The FCA is seeking comments by 18 March 2016. We would welcome a
discussion with you to discuss your views, before we submit our response
to the FCA.
Katie Kerry | +44 (0)115 976 6064
katie.kerry@brownejacobson.com

22
The Small Business, Enterprise and Employment Act 2005 (the Act)
received Royal Assent on 26 March 2015 and is due to be implemented in
stages during 2016. The Act covers a wide range of matters. The aim of
the Act is to enhance transparency and ensure that the UK is seen as a
trusted and fair place to do business. A number of provisions will be of
interest to corporate and management liability insurers such as the
requirements around clarity of ownership and control of companies
Significantly, the Act will confer an express right on liquidators and
administrators to assign causes of action relating to wrongful and
fraudulent trading, transactions at an undervalue, preferences and
extortionate credit transactions. Previously, such causes of action had ot
be pursued by an office holder, so this development gives rise to the
possibility of unrelated third parties pursuing such claims.
The Act also introduces additional grounds for disqualification of
directors and it will establish a right for creditors of an insolvency
company to be awarded compensation from a disqualified director. The
impact of the Act is likely to throw up a number of risk management
issues and disputes during 2016 and beyond.
Marlene Henderson
+44 (0)115 976 6133
In this section
Changes to the Insolvency Act 1986 regarding the assignment of a
cause of action
Modern Slavery Act 2015 – new compliance requirements under
section 54
Small Business, Enterprise and Employment Act 2015 – an update
New corporate offence of failure to prevent economic crime fails
to get off the ground – for now

23
Changes to the Insolvency Act 1986 regarding the assignment
of a cause of action
The Small Business, Enterprise and Employment Act 2015 (SBEEA) brings
about a number of changes to the Insolvency Act 1986 (IA 1986). In the
event of administration or liquidation new section 246ZD IA 1986 allows
the officeholder (the liquidator or administrator) to assign the following
causes of action (or the proceeds from them):
 a claim alleging involvement in fraudulent trading (s213 IA 1986)
 a claim against a director alleging wrongful trading (s214 IA 1986)
 a claim to challenge a transaction at an undervalue (s238 IA 1986)
 a claim to set aside a preference (s239 IA 1986)
 a claim of extortionate credit transactions (s244 IA 1986).
Prior to the changes to the IA 1986 as a result of the SBEEA, it was only
permissible for officeholders to assign causes of action which vested in
the company - but not personal actions which vested in the officeholder.
These amendments potentially pave the way for additional recoveries by
officeholders where a claim with a good prospect of success has been
identified, but the estate is without funds to pursue it - a recovery may
be possible by way of an assignment to a third party, such as a creditor.
Furthermore, new section 176ZB IA 1986 confirms the existing position
created by case law that the proceeds arising from the above claims, or
any assignment of them, will not form part of the company’s assets to
meet the claims of any floating charge holders.
It is hoped that such changes will provide increased flexibility for
officeholders to take action for the benefit of unsecured creditors. They
may also create a market for trading these rights (by assigning for a
premium) – which would generate immediate income for the estate. It
will also generate immediate income through assignment premium and
ease potential cost burdens on the estate. However on the flip side, if
such claims succeed following the assignment, the estate will not
receive the overall financial benefit.
Any officeholder wishing to assign these rights of action and any
assignees who wish to purchase them will need to take advice on various
aspects of the assignment – such as how payment for the assignment is
to be calculated. The officeholder is under a duty to obtain fair value
for the claim and this is likely to be a more difficult exercise than for
tangible assets.
Section 246ZD IA 1986 came into force on 1 October 2015. We anticipate
seeing an increase in the number of such claims being brought against
directors.
Dominic Offord | +44 (0)115 976 6149
Dominic.Offord@brownejacobson.com

24
Modern Slavery Act 2015 – new compliance requirements
under section 54
Section 54 of the Modern Slavery Act 2015 (MSA) came into force on 29
October 2015. It is designed to increase supply chain transparency and
place greater accountability on organisations for the condition of their
supply chains. ‘Modern slavery’ is the term used to encapsulate the two
offences in the MSA: slavery, servitude and forced or compulsory labour;
and human trafficking.
In essence section 54 catches:
 a body corporate or partnership;
 carrying on business or part of a business in the UK;
 supplying goods or services; and
 having an annual turnover of £36m or more.
Organisations caught by s54 must produce a slavery and human
trafficking statement for each financial year stating the steps they have
taken during that year to ensure slavery and human trafficking is not
taking place in any part of its business or any of its supply chain - or
issue a statement that it has taken no such steps.
Organisations with a financial year ending on or after 31 March 2016 will
be the first to be caught – statements must be issued as soon as
reasonably practicable and in any event within six months of the
relevant year end. Organisations with a financial year ending before 31
March 2016 do not have to make a statement regarding the current
financial year – but will do for future years.
These statements must be published on the organisation’s website (on
the assumption that they have one), with a prominent link to the
statement on its home page and for companies the statement must be
approved by the board of directors and signed by a director.
There are currently no mandatory requirements as to the content and
length of the statement, but the Government has recently issued helpful
guidance on what should be included in it here.
There is no initial fine for non-compliance but non-compliant
organisations may expect pressure from wider society and risk negative
publicity and an adverse impact on brand and share value for failing to
comply. In addition, there are implications for public procurement
processes – for local authorities and other public bodies which are
contracting authorities for the purposes of the Public Contracts
Regulations 2015 (Regulations), the Regulations have been amended to
provide that organisations which breach the obligations set out in
sections 1,2 or 4 of the MSA (which make it an offence to hold people in
slavery, forced labour or servitude; or to carry out human trafficking,
and related offences) must be excluded from procurement processes
conducted under the Regulations. The Government may also name and
shame non-compliant organisations, as they have done with the national
minimum wage for example.
The directors of any companies that fail to comply will be exposed to
claims if, due to their non-compliance, their company suffers financial
loss. Therefore, directors of organisations that are caught will need to
start taking steps internally now to make sure that they have got the
necessary processes and policies in place to make the relevant
statements in the future.
Emma Grant | +44 (0)115 934 2043
emma.grant@brownejacobson.com

25
Small Business, Enterprise and Employment Act 2015 – an
update
In last year’s edition of this review we provided details of some of the
proposed changes being introduced by the Small Business, Enterprise
and Employment Act 2015 (SBEEA). Many sections of the SBEEA have now
been brought into force – and the implementation timetable for other
aspects continues to evolve.
The provisions which allow the Secretary of State to apply to the court
for a directors’ disqualification order on the grounds that a director has
been convicted of certain offences overseas came into force in October
2015. The overseas offences include an offence committed outside of
Great Britain that corresponds to an indictable offence under the laws
of England or Wales (or Scotland) relating to:
 the promotion, formation, management, liquidation or striking off of
a company (or any similar procedure)
 the receivership of a company’s property (or any similar procedure)
or a person being an administrative receiver of a company (or holder
of a similar position).
Looking forward to 2016, the SBEEA will see the implementation of the
following requirements (amongst others):
 April 2016 – possibly the largest impact of the SBEEA will be the
new requirement that companies investigate and obtain information
on persons with ‘significant control’ over them (known as
PSCs). Details of those persons will be held on a publicly available
register at Companies House from June 2016. The aim is that ‘true’
controllers and beneficial owners of companies cannot hide behind
trusts, nominee arrangements or other complex group structures so
that the public do not know who is ultimately pulling the strings.
Broadly speaking a PSC will be any person who directly or indirectly
holds more than 25% of the shares or controls the exercise of more
than 25% of voting rights in the company, or is entitled directly or
indirectly to control the right to appoint or remove a majority of the
board of directors or has the right to exercise or actually exercises
‘significant influence or control over the company’ – at the time of
writing the Government is still finalising guidance on exactly what
this means.
 October 2016 – there will be a prohibition on corporate directors –
subject to certain exemptions which are yet to be finalised - and
one year after the relevant section comes into force, any remaining
directors (who do not fall within one of the exceptions) will cease to
be directors. It is worth noting that the timetable for the
implementation of this change has already been pushed back a few
times and may slip again.
Companies and their boards will need to ensure they are prepared to
comply with these changes once they go live, otherwise they will face
liability for non-compliance.
Emma Grant | +44 (0)115 934 2043
emma.grant@brownejacobson.com
Marlene Henderson | +44 (0)115 976 6133

26
New corporate offence of failure to prevent economic crime
fails to get off the ground – for now
In last year’s review we explained how the Government was considering
the creation of a new offence of failing to prevent economic crime – this
new offence was going to mirror and expand the existing offence of
failure to prevent bribery under section 7(1) of the Bribery Act 2010.
However, in the autumn, Justice Minister Andrew Selous revealed that
the Ministry of Justice had decided to stop work on this new offence, as
there was “little evidence of wrongdoing going unpunished”. The
Ministry of Justice also noted that (at that point) there had been no
prosecutions under the Bribery Act offence of failing to prevent bribery,
which was going to be used as the blueprint for this new offence.
It had previously been said that the new offence would make it easier
for the Serious Fraud Office (SFO) to bring charges against companies –
and that the threshold for establishing corporate criminal liability must
be lowered given the small number of corporate prosecutions to date.
When plans to shelve the proposed new offence were announced
commentators also suspected that there would be renewed enthusiasm
for revisiting this topic once the SFO had shown that it could bring
successful prosecutions under the existing ‘failing to prevent bribery’
offence. We will need to watch this space, as since Andrew Selous’
announcement the SFO has now secured its first successful use of
section 7 of the Bribery Act – the offence of failure to prevent a bribe –
in the case of Serious Fraud Office v Standard Bank Plc (30 November
2015). So for now companies can place on hold any changes they were
considering to ensure they did not commit the new offence – but we
anticipate further developments in the year ahead.

27
2015 saw a significant amount of important case law, with several cases
having a real impact on practices within the construction industry.
There was particular focus on the issue of payment applications, and the
notices which must be served in response, which we address in this
review. We also consider implied terms which can extend limitation
periods and whether or not construction contracts can impose both an
obligation to comply with specifications and standards and at the same
time achieve a particular result.
Looking forward, we expect 2016 to bring further case law arising in
relation to payment notices, with a few aspects of this matter remaining
unclear. From a practical perspective, all government projects will be
required to use BIM (Building Information Modelling) level 2 and
companies will need to start complying with the requirements of the
Modern Slavery Act 2015.
Tim Claremont
+44 (0)20 7871 8507
Tim.Claremont @brownejacobson.com
In this section
Payment in construction contracts – the importance of notices
Challenging an adjudicator’s award - it’s not over till it’s over
What happens when complying with performance specifications
does not achieve the required result?

28
Payment in construction contracts – the importance of notices
Introduction
Over the past year there have been a number of disputes that have
required the courts to provide guidance on the payment process in
construction contracts. The issues raised in these cases are of practical
concern for all parties in the industry but most notably contract
administrators (such as Architects, Project Managers and Engineers) who
are responsible for issuing payment notices.
Before the changes to the Construction Act1
in 2011, if an employer (or
its professional contract administrator) missed a payment notice, then
the employer would have to pay the value of works set out in the
payment application (often as a result of what became known as ‘smash
and grab’ adjudications regarding the lack notices). However, many
employers sought to address any overpayment by starting a counter
adjudication to have the works properly valued and use that decision to
set off against the employer’s obligation to pay. However, during the
course of 2014 and 2015, things changed.
What have the courts said?
By way of reminder, the Construction Act sets out a mechanism for the
parties to a construction contract to serve notices within a prescribed
period to determine what sums are due for payment. In various disputes
over the past year the courts have held that:
1. If an employer fails to serve a notice in time then (absent fraud) the
employer must make payment of the sum stated in the application
from the other party, whether the sum is correctly valued or not2
.
This could mean that the employer has to ‘over-pay’ the contractor.
2. There is a distinction between a party’s ability to subsequently
challenge the proper value of an application dependent on whether:
1
Housing Grants, Construction and Regeneration Act (1996), as amended by the
Local Democracy, Economic Development and Construction Act (2011)
2
ISG Construction Ltd v Seevic College [2014] EWHC 4007 (TCC)
a. it is an interim or final account application; and
b. the payment terms of the contract3
.
Generally, the employer can still dispute the proper value of a
final account application even if relevant notices have been
missed because otherwise it would have no means of challenging
and adjusting the amount subsequently.
3. Where there is a contractual and statutory payment process, parties
cannot make interim applications early or outside of the process, or
circumvent the process by submitting applications outside of a
payment cycle4
.
What lessons are to be learnt from these cases?
The decisions referred to above serve as a sharp reminder to contract
administrators of the importance of:
1. Ensuring that notices are served on time. When checking dates, it is
important to look at the actual payment due dates in the body of
the contract rather than those set out in an appended summary
schedule.
2. Considering what your contract says about your ability to recover
any overpayments. Different standard forms of contract have
different arrangements, for example the JCT suite of contracts does
not entitle parties to recover any overpayment until the final
payment but NEC suite of contracts permits correction in the next
interim payment.
Insurers should make clear to their policy holders the importance of
notices. Insurers will also need to consider whether costs arising from a
failure to serve notices fall within the scope of its coverage.
Mark Stubbs | +44 (0)115 976 6052
mark.stubbs@brownejacobson.com
3
Galliford Try Building Ltd v Estura Ltd [2015] EWHC 412 (TCC)
4
Caledonian Modular Ltd v Mar City Developments Ltd [2015] EWHC 1855 (TCC)

29
Challenging an adjudicator’s award - it’s not over till it’s over
Introduction
In the first ever case relating to construction adjudication to reach the
Supreme Court, the Law Lords decided that where a party had made an
overpayment pursuant to an adjudicator’s decision, the time period for
challenging the decision and payment runs from the date of payment,
not from the date of the alleged breach of contract which gave rise to
the original dispute5
. This produces a potential anomaly with different
limitation periods running for different parties.
Practical implications
The practical implications in the Supreme Court case were that one
party was able to bring a claim in respect of the adjudicator’s decision
(which was in time) but the other party could not bring a counter-claim
in respect of the original breach of contract because that claim was out
of time. The Supreme Court decision affects every ‘construction
contract’. This means that regardless of the outcome of any
adjudication, both parties must consider what to do about the
adjudicator’s decision – do you want or need the matter finally
determined (either in court or by arbitration?). If not, the successful
party will run the risk of the paying party starting proceedings to
recover a payment made, while the successful party’s own limitation
period runs out. In this scenario, the successful party to an adjudication
should consider whether they have a cross claim that must be started
before limitation expires. Even non-money claims may need
consideration given the width of the implied term (e.g. a declaration
might give rise to a right to payment). In any event, the preservation of
relevant documents is of paramount importance.
To deal with this potential issue, insurers should request that their
policy holders incorporate a clause into their contracts expressly stating
that an adjudicator’s decision is finally binding unless a claim is brought
within a defined time period.
5
Aspect Contracts (Asbestos) Ltd v Higgins Construction plc [2015] UKSC 38
The decision has also highlighted the fact that the Construction Act does
not state expressly how any adjudication is finally determined. It will
be interesting to see if this is addressed in any future changes to the
Act.
Tim Claremont | +44 (0)20 7871 8507
Tim.Claremont@brownejacobson.com

30
What happens when complying with performance specifications
does not achieve the required result?
Introduction
The Court of Appeal has provided important guidance regarding the
interaction between reasonable skill and care obligations and other
requirements in a contract (such as a requirement to comply with a
performance specification)6
.
The case considered the design and construction of an offshore wind
farm. The contractor had designed and built wind turbine foundations in
accordance with international standards and with reasonable skill and
care. However, an error in a relevant international standard resulted in
defects emerging well within the 20 year expected lifespan of the
turbine foundations. This required remedial work costing €26.25
million. The court had to consider who should bear the cost of that
work. Was it enough that the contractor had exercised reasonable skill
and care, or was it bound by a more onerous obligation in the
performance specification in the contract for the foundations to last 20
years?
The Court of Appeal’s decision
The Court of Appeal confirmed that construction contracts, if worded
with sufficient clarity, could impose a double obligation upon the
contractor, e.g. to (a) comply with certain specifications and standards
and (b) achieve a particular result. The question was whether or not the
contract imposed such a double obligation.
Here, the contract did not impose that double obligation. Whilst it
undoubtedly said that the foundation design shall ensure a lifetime of 20
years (and was therefore at first sight a warranty that the foundations
will function for 20 years), all the other provisions were directed
towards a design life (which did not mean that inevitably it will function
for 20 years (although it probably will)) rather than a service life.
6
MT HØjgaard A/S v E.ON Climate and Renewables UK Robin Rigg East Ltd and
another [2015] EWCA Civ 407
Further, the alleged warranty was contained in a part of the contract
which was fourth in the contractual order of precedence and included
qualified wording. If the employer had wanted such a guarantee, it
should have been clearly flagged up in the contract documents.
Comment
The case is unusual in that the cause of the design mistake was an error
in an international standard. However, it highlights the uncertainty and
conflict which can arise in the event that duties and obligations are not
clear. A similar issue could potentially arise with the JCT Major Projects
Form, where clause 11.2 provides that “the contractor warrants that
the design of the project will: .1 comply with the statutory
requirements… [and] .2 satisfy any performance specification contained
within the requirements” and clause 11.3 contains a warranty from the
contractor that he will perform his design obligations with what amounts
to reasonable skill and care. Similarly, we see many bespoke contracts
and amendments to standard forms which seek to impose similar dual
obligations.
Insurers should satisfy themselves that their policyholders minimise the
risk of similar litigation by taking the following steps:
 If a warranty is required, it should be set out expressly in the
conditions rather than buried in the specifications.
 Ensuring any absolute obligations are clearly and consistently
drafted.
 Making clear which obligations are absolute and which are subject to
reasonable skill and care.
 If a priority list of documents to aid interpretation is included, then
any particularly important obligations are contained in documents at
the top of that list.
 Time should be taken to read technical documents alongside the
contract conditions to ensure that they work together to achieve the
desired result. This is likely to be time consuming, and therefore
costly - but it could avoid expensive litigation.
Tim Claremont | +44 (0)20 7871 8507
Tim.Claremont@brownejacobson.com

31
The most recent statistics suggest a continued downward trend in the
volume of tribunal claims in the wake of the introduction of tribunal
fees and mandatory early conciliation. The Government has begun a
review of the tribunal fee structure and it will be interesting to see
whether it adopts any change in approach, particularly in view of
concerns raised about restricted access to justice. This coincides with
the awaited decision as to whether UNISON can appeal to the Supreme
Court following the unsuccessful Court of Appeal challenge to tribunal
fees.
Case law in many areas has also continued to evolve, driven in part by
referrals from the UK tribunals and courts to the European Court of
Justice, in particular on the interpretation of rights under the Working
Time Regulations 1998 and what should be included in calculations for
holiday pay.
Peter Jones
+44 (0)115 976 6180
Peter.Jones@brownejacobson.com
Looking forward, employers will be faced with the introduction of
regulations relating to zero hours contracts and new laws designed to
further curb illegal working. The new National Living Wage takes effect
on 6 April 2016 and employers will also have to consider the impact of
anticipated new legislation relating to a variety of topics including
disclosure of gender pay gap information and industrial action. However,
potentially the greatest factor which could influence the direction of
change in employment law in the coming years may be the outcome of a
referendum on European membership
If you would like further advice on any of the issues raised or any other
employment law query, please do contact us.
In this section
Employment statistics - update on tribunal fees two years on and
the Introduction of Mandatory Early Conciliation
Working Time Regulations - case law update
Whistleblowing update – public Interest
Redundancy consultation - Woolworths and Ethel Austin
Things to look out for in 2016

32
Employment statistics - update on tribunal fees two years on
and the Introduction of Mandatory Early Conciliation
Following the introduction of tribunal fees on 29 July 2013, there are 26
months of data available post fees (August 2013 to September 2015).
The table below shows the number of Tribunal Receipts (monthly,
January 2012 to September 2015), but this is not the same as the
number of cases (where a number of multiple receipts can be counted
as one case as they are bought against one employer by a number of
people).
On 11 June 2015, the Government announced the start of the
Employment Tribunal Fees Post Implementation Review. The purpose of
the review is stated to be to consider how effective the introduction of
fees (and the current fee remission scheme) has been in meeting the
original financial and behavioural objective, while maintaining access to
justice e.g. financial – transfer a proportion of the costs from the
taxpayer to those who use the tribunal where they can afford to do so;
b) Behavioural – to encourage parties to seek alternative ways of
resolving their disputes; and c) Justice – maintain access to justice. The
Scottish Government has already confirmed that it intends to abolish
tribunal fees in Scotland; time will tell whether England and Wales
follow suit.
It is also possible that the introduction of fees has affected the number
of claims settled without a full hearing. A claimant who is due to pay a
fee and who is either unable to afford this (and does not qualify for
remission), or feels unable to take the financial risk of losing the fee in
the face of an uncertain outcome at hearing, may be more willing to
settle a claim on terms favourable to the employer.
Settlement of claims pre-hearing
Following on from the Introduction of Early Conciliation in May 2014, the
statistics show that relatively few people reject the offer of Early
Conciliation. In the first year of operation, 8,504 (about 10.5%) of
employees rejected the offer. Acas only contacts the employer if the
employee has accepted conciliation and in these cases, 9,242 (11.4%) of
employers rejected the offer of conciliation in the first year of
operation.
Statistics on the outcome of cases become meaningful when all the
cases received during a period have had time to reach a final outcome.
Almost all of the notifications received by Acas in the first nine months
have now reached an outcome, and these are set out in the Table
below.
Outcome of Cases Notified April -
December 2014
Number Proportion (%)
COT3 Settlement 9,304 15
Did Not Progress to Tribunal Claim 37,925 63
Dispute Progressed to Tribunal Claim 13,585 22
Total 60,814
Leigh Carroll | +44 (0)115 908 4814
leigh.carroll@brownejacobson.com

33
Working Time Regulations - case law update
2015 has seen the development of cases, the outcomes of which could
impact on the number of claims received by employers for unpaid
holiday, commission and other payments.
Lock V British Gas Trading Ltd ET/1900503/12 - Lock brought
proceedings for unlawful deduction of wages on the basis that following
a period of holiday (as he was only paid his basic pay during such a
period) his remuneration dropped by as much as 60% as he did not
receive commission payments for the period he was on holiday. The case
was referred to European Court of Justice (ECJ) which found commission
payments should be taken into account when calculating minimum
holiday entitlement under the Working Time Directive. In summary it
was held that in order to be compatible with EU law, the Working Time
Regulations 1998 had to be interpreted so as to require employers to
take performance-related commission payments into account when
calculating holiday pay.
In May 2015 it was announced that British Gas had submitted an appeal
to the Employment Appeals Tribunal (EAT
The appeal was heard on 8 & 9 December 2015, the decision is expected
in the very near future. In the meantime, the majority of cases remain
stayed pending the outcome of the appeal.
Federacion de Servicios Privados del sindicato Comisiones Obreras v
Tyco Integrated Security SL and Tyco (c-266/14) - Integrated Security
SL and Tyco Integrated Fire & Security Corporation (the companies), are
security system installation and maintenance companies within the same
group, each employing around 75 technicians. These technicians are
each assigned to a particular province of Spain. In 2011, the companies
closed their provincial offices, and assigned all their employees to their
central office in Madrid. Each technician uses a company vehicle to
travel from their homes to the places where they carry out installation
or maintenance, and then to return home at the end of the day. The
distances from their home to their assignments vary, and are sometimes
more than 100 km. They receive details of their assignments for the
following day from the companies via an application on a mobile phone,
which shows them the task list for that day.
The companies do not regard the first journey of the day (from home to
the first assignment), or the last journey of the day (from the last
assignment to home) as working time. They therefore calculate the
working day as starting from the time the technician arrives at their first
assignment, and ending when they leave their last assignment.
The technicians brought a complaint through their union in a Spanish
court that the companies were breaching the Spanish working time rules
by not including the time spent on their first and last journey of the
day.
Decision
The European Court of Justice held that for workers who did not have a
fixed or habitual place of work, times pent travelling each day between
their homes and the premises of the first and last customers designated
by their employer did constitute ‘working time’ within the meaning of
the Directive. The decision of the ECJ provides clarity in defining
working time for mobile workers with no fixed workplace.
Hayley Gilbert | +44 (0)115 976 6116
Hayley.Gilbert@brownejacobson.com

34
Whistleblowing update – public Interest
Underwood v Wincanton plc UKEAT/0163/15 - The case concerned a
grievance raised by four HGV drivers alleging unfair allocation of
overtime. Mr Underwood was an HGV driver with Wincanton plc. In
November 2013, Mr Underwood, together with three of his colleagues,
submitted a written complaint, regarding their terms and conditions of
employment, including, in particular, the way in which overtime was
allocated among drivers. Following his dismissal, Mr Underwood issued a
claim in which he submitted, among other things, that the November
2013 complaint amounted to a protected disclosure under section
43B(1)(b) ERA 1996 and that his dismissal was automatically unfair. The
Regional Employment Judge struck out the claim, holding that as it
related to a dispute between Mr Underwood (and three of his co-
workers) and Wincanton, he was not entitled to seek the protection of
section 43B(1) ERA 1996. He observed that a dispute between an
employer and employee relating to the terms of employment existing
between them is not something which the public are affected by,
directly or indirectly. Therefore, Mr Underwood could not have held a
reasonable belief that the matter was in the public interest. Mr
Underwood appealed to the EAT.
Decision
The EAT allowed the appeal, noting that the Regional Employment
Judge had not had the benefit of EAT decision (Chesterton Global Ltd
(t/a Chestertons) and another v Numohamed UKEAT/0335/14) when
considering whether to strike out the claim. The EAT first looked at
whether there were any grounds for distinguishing Chesterton and
concluded there were not. In Chesterton, the inaccurate accounts had
raised the question of whether there had been fraud, which the EAT
noted was self-evidently a matter of public interest. However, although
only implicit in the claim, there was a suggestion that those making the
disclosure had been raising concerns of vehicle safety and road-
worthiness, which raised wider issues of road safety, which the EAT
noted might also be thought to be a matter of public interest. The EAT
went on to consider the various grounds of appeal. First, it considered
whether the tribunal had applied
too narrow a definition of ‘public’ when applying the ‘public interest’
test. It was clear from Chesterton that ‘public’ could be constituted by
a subset of the public, “even if that subset comprised persons employed
by the same employer on the same terms”. Therefore, in holding that a
dispute between Mr Underwood, and his fellow employees, and
Wincanton could never be said to be in the public interest, the tribunal
had plainly applied too narrow a definition of ‘public’. Further, the EAT
noted that the tribunal had directed itself that disputes relating to
terms and conditions of employment could not constitute matters in the
public interest. This, the EAT held, was inconsistent with the decision in
Chesterton and therefore a misdirection. Finally, in relation to the
tribunal's ruling on ‘reasonable belief’, the EAT noted that in
Chesterton, it was held that a matter between employees and their
employer, where mutuality of obligation existed, was capable of being a
matter within the public interest. It followed that an employee could
reasonably hold the belief that a disclosure relating to such matters
could be within the public interest and the tribunal's conclusion on this
point could not be sustained. The claim would therefore be allowed to
proceed for hearing by the tribunal.
Comment
In June 2013, the Government amended the definition of a protected
disclosure by requiring that whistleblowers reasonably believe that the
disclosure is in the public interest. This amendment was intended to
stop employees from securing ‘gold-plated protection’ for themselves as
soon as they complained to their employer about any aspect of their
employment, such as disputes over their employment contract. This
case is exactly the type of scenario that the new law is designed to stop
falling within the whistleblowing protection. Both this decision and
Chesterton demonstrate how easy it is to turn what is essentially an
individual grievance into something that is in the public interest to
disclose. This decision confirms the relatively low threshold for bringing
a whistleblowing claim.
Emily Addai | +44 (0)115 976 6501
emily.addai@brownejacobson.com

35
Redundancy consultation - Woolworths and Ethel Austin
WW Realisation 1 Limited and Ethel Austin Limited were national high
street retailers, trading respectively as ‘Woolworths’ and ‘Ethel Austin’.
Woolworths went into administration in November 2008 and Ethel Austin
in March 2010, resulting in large-scale redundancies. Employment
tribunal awards for failure to inform and consult under section 188 of
Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA)
were made, but only in respect of those employees who worked at
stores with 20 or more employees. The tribunals held that each store
was a separate ‘establishment’ for the purposes of TULRCA.
Consequently, the duty to inform and consult had not been engaged in
respect of stores with fewer than 20 employees and those employees
were not entitled to a protective award. The Secretary of State was
joined as a party to the proceedings against Woolworths as it had
potential liability for the employees' protective awards due to
Woolworths' insolvency. The Union of Shop, Distributive and Allied
Workers (USDAW) appealed against the tribunals' decisions.
The EAT upheld USDAW's appeal in both cases. It held that the words ‘at
one establishment’ in section 188 of TULRCA were incompatible with the
Directive and that those words should be disregarded for the purposes of
a collective redundancy involving 20 or more employees.
TULRCA states that an employer is obliged to collectively consult if it "is
proposing to dismiss as redundant 20 or more employees at one
establishment within a period of 90 days or less". Although the EAT held
in USDAW v Ethel Austin Ltd and another UKEAT/0547/12; 0548/12 (the
Woolworths case) that the words ‘at one establishment’ should be
disregarded, in order to comply with the requirements of the Directive,
this was effectively overruled by the ECJ USDAW and another v WW
Realisation 1 Ltd, Ethel Austin Ltd and another (C-80/14). The ECJ has
now clarified that the term ‘establishment’ under the Directive means
the local unit or entity to which workers are assigned to carry out their
duties. The decision will come as something of a relief to employers, as
had the Directive required the aggregation
of dismissals across all workplaces belonging to a single employer far
more employers would have been obliged to consult over collective
redundancies.
The case was due to return to the Court of Appeal to determine
whether, on the facts, each branch of Woolworths and Ethel Austin was
a separate establishment. We understand that the Court of Appeal has
this month (January 2016) confirmed that the UK position is consistent
with the ECJ ruling and as expected, that each Woolworths store was
indeed a separate establishment. Unusually, we understand that no
hearing actually took place in the Court of Appeal and that the matter
was dealt with by consent of the parties. We have therefore not had the
often useful guidance from the Court of Appeal we were hoping for.
Sarah Hooton | +44 (0)115 976 6033
Sarah.Hooton@brownejacobson.com

36
Things to look out for in 2016
Zero Hours Workers - The Exclusivity Terms in Zero Hours Contracts
(Redress) Regulations 2015 (SI 2015/2021) (the Regulations) were made
on 14 December 2015 and came into force on 11 January 2016. The
Regulations provide a remedy for zero hours workers against employers
who include exclusivity clauses in their contracts of employment.
Exclusivity clauses in zero hours contracts were rendered unenforceable
under section 27A(3) of the Employment Rights Act 1996 which was
inserted by section 153 of the Small Business, Enterprise and
Employment Act 2015.
Recruitment Agencies - On 13 October 2015, the Government published
a new consultation on reform of the legislation which regulates
employment agencies and employment businesses. This follows a
consultation issued in January 2013 by the coalition government on
legislative reform in this area. The Government is now consulting on
various deregulatory changes to the Conduct of Employment Agencies
and Employment Businesses Regulations 2003 (SI 2003/3319) (Conduct
Regulations). In addition, the Government is proposing to ban
recruitment agencies from recruiting work-seekers solely from overseas
EEA countries without advertising the relevant vacancies to domestic
work-seekers. This follows the introduction of a new requirement in
January 2015 that prevents recruitment agencies from advertising
British vacancies solely in overseas EEA countries, unless certain
conditions apply. The consultation closed on 23 November 2015 and the
Government will publish its response to the consultation by 15 February
2016.
The Immigration Bill 2015-16 - was introduced to the House of
Commons and had its first reading on 17 September 2015. The Bill
contains proposals to curb illegal working and prevent the exploitation
of migrant workers by strengthening enforcement, imposing tougher
sanctions on employers and making it a criminal offence to work
illegally, as outlined in the Queen's speech. The Bill proposes the
establishment of a statutory Director of Labour Market Enforcement (the
Director) responsible for overseeing enforcement across the labour
market. On 14 October 2015, this proposal along with others was set out
in a consultation paper on ways in which to improve enforcement of
employment rights and prevent the exploitation of workers. Second
reading took place at the House of Lords on 22 December 2015.
Paul Sands | +44 (0)115 976 6076
paul.sands@brownejacobson.com

37
2015 has seen an increased number of corporate manslaughter
prosecutions and convictions including the first conviction of a care
home organisation and first ever prosecution of a public body, namely
an NHS trust. Senior management are invariably prosecuted alongside
corporate bodies and a number of directors have been convicted of
health and safety offences.
2015 also saw the introduction of the new Construction Design and
Management Regulations intended to simplify the responsibilities of
those involved in construction work.
The Health and Safety Executive continue to bring a significant number
of prosecutions and from 1 February 2016 the courts will be
implementing the new sentencing guidelines for health and safety
offences, corporate manslaughter and food safety and hygiene Offences.
Andrew Hopkin
+44 (0)115 976 6030
Andrew.Hopkin@brownejacobson.com
Likewise In 2015 the Care Quality Commission (CQC) has become
increasingly active in enforcing health and social care legislation with
many more inspections and court applications to suspend or cancel the
registration of care providers. It is anticipated such action will continue
unabated with prosecutions by CQC also likely.
The year ahead will see further inspection and enforcement by all
Regulators from the HSE and Environment Agency to the Gang Masters
Licensing Authority and Care Quality Commission and our regulatory
team is well placed to advise not just upon enforcement action but upon
the steps businesses and individuals can take now to put in place
systems and processes that will withstand scrutiny in the event of an
accident, incident or audit.
In this section
Changes to sentencing in the criminal courts
The new Construction (Design and Management) Regulations

38
Changes to sentencing in the criminal courts
A change in Magistrates’ Court procedure and new sentencing guidelines
for regulatory offences are likely to have a notable impact on
prosecutions in the criminal courts.
On 12 March 2015, section 85 of the Legal Aid, Sentencing and
Punishment of Offenders Act 2012 came into effect in England and
Wales. This removed the cap on fines imposed by Magistrates’ Courts
where the previous maximum was £5,000 or more. These new provisions
will affect prosecutions brought in all criminal cases including regulatory
offences under health and safety, environmental and food safety
legislation. The new powers apply to offences committed after 12 March
2015.
Against the background of the new Act, the consultation phase for the
new Health and Safety Offences, Corporate Manslaughter and Food
Safety and Hygiene Offences Guidelines concluded in February 2015 and
new guidelines will come into force on 1 February 2016.
Magistrates’ Courts increasingly place greater emphasis on sentencing
guidelines particularly in relation to regulatory prosecutions. The new
proposed guidelines on health and safety and food safety are highly
likely to notably increase sentences for offences deemed to fall into the
most serious categories.
However they also raise the possibility of greater arguments in relation
to offence categories and aggravating features, with the potential for
more fact finding hearings in the Magistrates’ Court to resolve disputes.
Likewise Magistrates’ Courts will have to become much more
accustomed to analysing the accounts of larger companies in order to
assess their ability to pay substantial fines.
The changes do not mean that every prosecution of a company will be
dealt with in the Magistrates’ Court and courts retain the right to
allocate or commit cases to the Crown Court for reasons other than
insufficient sentencing power, including the potential for a complex
trial. Defendants retain the right to elect Crown Court trial.
Guidance has been provided to the Magistrates’ Court about the types of
cases that should be considered for Crown Court allocation, namely
those:
a) involving death or significant, life changing injury or a high risk of
the same
b) involving substantial environmental damage or polluting material of
a dangerous nature
c) involving a major adverse effect on health or quality of life, animal
health or flora has resulted
d) where major costs through clean up, site restoration or animal
rehabilitation have been incurred
e) where the defendant corporation has turnover over £10 million and
has acted in a deliberate, reckless or negligent manner
f) where the defendant corporation has a turnover in excess of £250
million
g) where the court will be expected to analyse complex company
accounts
h) cases with a high profile or of an exceptionally sensitive nature.
Alongside consideration of the financial position of any offender,
corporate or individual, the guidelines focus upon harm caused by
offending and the culpability of the offender. It is hoped that the
guidelines will result in more consistent sentencing and post 1 February
2016 we will start to see whether or not that aim is being achieved.
Andrew Hopkin | +44 (0)115 976 6030
Andrew.Hopkin@brownejacobson.com

39
The new Construction (Design and Management) Regulations
The new Construction (Design and Management) Regulations came into
force on 6 April 2015. The Regulations define and separate duties and
responsibilities for those engaged in construction work. The 2007 CDM
Regulations are replaced and importantly the new regulations remove
the exclusion for residential properties. However although residential
homeowners are now duty holders, unlike commercial clients they are
able to transfer their duties to their appointed contractor.
The new regulations also relax the notification requirements for
construction projects and extend the duties imposed on a range of duty
holders including clients. In particular those overseeing construction
projects would be wise to ensure that they are familiar with the duties
they must discharge from the planning phase through to completion of a
project.
The Health and Safety Executive have published a range of legal series
guidelines to support the new regulations but they are yet to decide
whether to issue a new Approved Codes of Practice (ACOP). The
response to a recent consultation was that they should publish a new
ACOP and 2016 will see whether such guidance is forthcoming, albeit on
a practical level. The HSE website is a good source of free guidance on
the new regulations.
Rachel Lyne | +44 (0)121 237 4584
rachel.lyne@brownejacobson.com

40
With numerous high profile data breaches in 2015, including by
household names such as Talk-Talk, Marks & Spencer, Ashley Madison
and British Gas, 2015 can be said to have been the ‘year of the data
breach’. Most industry commentators, however, consider that 2015 is
unlikely to be a one-off, as cyber criminals remain a step ahead of many
organisations’ cyber defence. Although these events have increased the
attention that businesses and the public give to data protection and
information security issues, knowing of the threat is only the first step
towards being in a position to defend against it. Unfortunately for
businesses and insurers, 2015 may only represent the tip of the iceberg.
Perhaps the most significant legal development in this sector in 2015 has
been the European Court’s ruling that the Safe Harbour scheme (the
scheme that allowed EEA-based organisations to share personal data
with those based in the US-based without breaching the Data Protection
Directive) was invalid. UK-based organisations that have been relying
upon Safe Harbour must quickly review their arrangements and find
alternative solutions in order to continue to transfer data to the US
whilst maintaining sufficient protection for data subjects.
Tim Johnson
+44 (0)115 976 6557
tim.johnson@brownejacobson.com
Over the past 12 months, we have also seen technological developments
that have implications for cyber and data insurers, in particular the
rapid expansion of the ‘Internet of Things’, which brings with it both
opportunities and significant risks as previously ‘standalone’ items
become connected to the world wide web (and consequently
significantly more vulnerable to attack).
Looking forward, it is likely that the new Data Protection Regulations
will become European Law at some point in 2016. Although the UK will
have two years to transpose the Regulations into UK law, the
Regulations will significantly increase the sharpness of the ICO’s teeth
when it comes to imposing fines for data protection breaches (which will
be up to 4% of a company’s gross annual turnover).
We hope you find these updates useful. If you would like further advice
on any of the issues raised or any other cyber or data protection query,
please do contact us.
In this section
Data Protection Regulation
Cyber security
Nuisance calls
The death of Safe Harbour?

41
Data Protection Regulation
The text of the new General Data Protection Regulation has been
handed down, after over four years of negotiation in Europe. Although
not quite finalised (due to final publication and checking of the cross
referencing), commentators are reasonably certain that we have the
final text.
The Regulation will have direct effect into UK law (which means we will
not need a UK Act of Parliament) and will replace most, if not all, of
the Data Protection Act 1998.
The Regulation, like the Data Protection Act, will regulate the
processing of personal data by organisations, and protect individuals’
rights over their personal data.
The key issues that affect insurers are:
1. Data breach notification requirement – breaches to be notified to
the Regulator within 72 hours of discovery
2. Significant Fines for breach of the Regulation – up to 4% of gross
annual turnover
3. Requirements to give information when collecting personal data
4. Restricted use of personal data by insurers for marketing
5. New principles including: the right to be forgotten and data
minimisation
6. It will broaden the scope from the current application of EU data
protection law
7. It aims to simplify multi-jurisdictional businesses’ compliance
processes through lead data protection authorities
8. It establishes new data protection rights and enhanced
accountability principles
9. Big Data applications and consumer profiling may also be more
challenging under the new EU regime.
The draft Regulation contains a two-year transition period after it takes
effect to allow data protection authorities time to implement the new
oversight provisions and for companies to review and expand their data
protection compliance programs.
Helena Wootton | +44 (0)115 976 6108
Helena.Wootton@brownejacobson.com
Conor Wileman | +44 (0)121 296 0665
conor.wileman@brownejacobson.com

Commercial insurance risk and liability review, February 2016

Commercial insurance risk and liability review, February 2016

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