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Manoj Vaghela

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Insurance Act 2015 S.13a, Damages for Late Payment of Insurance Claims (UK, 2026)

By Global Law Experts

– posted 2 hours ago

Late payment insurance claims uk have moved from a peripheral concern to a central strategic issue for policyholders, and section 13A of the Insurance Act 2015 is the reason why. For the first time in modern English law, an insurer that takes an unreasonable time to pay a valid claim can be liable in damages for the losses that delay causes, over and above the claim sum and any contractual interest. In 2026, that statutory right sits alongside intensifying supervisory pressure from the Financial Conduct Authority, whose Consumer Duty and broader focus on claims-handling outcomes shape how courts and tribunals now assess what a “reasonable time” to pay actually means.

This guide explains the legal test, the evidence you need, how damages are quantified, and the procedural choices available to in-house counsel, risk managers and finance directors deciding whether to pursue an insurer.

Who this is for: In-house counsel, risk managers and finance directors at UK corporates assessing whether to pursue an insurer for late payment and how to quantify the resulting damages.

What it covers: the s.13A legal test, the evidence needed to prove unreasonable delay, quantification approaches, procedural choices (court versus arbitration), a sample timetable and practical next steps.

Quick answer, can you claim for late payment insurance claims uk?

The short answer is yes. Where section 13A applies, a policyholder whose insurer has failed to pay a valid claim within a reasonable time can bring a claim for damages to compensate the additional loss caused by that delay. This is a distinct right from the underlying claim under the policy and from any entitlement to interest. It reflects a deliberate legislative decision to give policyholders a remedy for the real-world consequences of delayed indemnity, insolvency risk, lost contracts, emergency financing and reputational harm. Section 13A was introduced by the Enterprise Act 2016, which inserted it into the Insurance Act 2015, and it applies to insurance contracts entered into, and variations agreed, on or after 4 May 2017.

Typical outcomes from a well-evidenced late payment claim include:

Damages under s.13A. Compensation for consequential losses flowing from the delay, such as lost profits, additional financing costs and mitigation expenditure.
Interest. Contractual interest under a late payment clause, or statutory or discretionary interest on the sums due.
Declaratory relief. A court declaration confirming the insurer’s liability to indemnify, which can be pursued alone or together with a damages claim.
Interim or urgent relief. In appropriate cases, an application to compel payment or preserve the policyholder’s commercial position pending resolution.

When to consider immediate action

The single most important early step is to preserve the claim file. From the moment delay begins to cause commercial harm, treat the matter as potential litigation. Preserve all correspondence with the insurer and its loss adjusters, record every chase and acknowledgement, and begin a contemporaneous chronology. The strength of a late payment insurance claim depends heavily on documenting the sequence of events and the losses that accrue while the insurer sits on the file. Waiting until the underlying claim is finally paid before considering a s.13A claim risks losing evidence and blunting the narrative of unreasonable conduct.

What s.13A of the Insurance Act 2015 actually says

Section 13A of the Insurance Act 2015 implies a term into every contract of insurance that the insurer must pay any sums due in respect of a claim within a reasonable time. The core provision states that it is an implied term of every contract of insurance that if the insured makes a claim under the contract, the insurer must pay any sums due in respect of the claim within a reasonable time.

The section goes on to make clear that a reasonable time includes a reasonable time to investigate and assess the claim, and that if the insurer breaches that implied term, the policyholder has the remedies available for breach of contract, including damages, in addition to the sums due under the claim and any interest.

Statutory purpose and legislative context

Section 13A was inserted into the Insurance Act 2015 to address a long-standing gap in English law. Before the reform, an insurer’s obligation was treated as an obligation to hold the insured harmless, and a claim payment was legally characterised as damages for the insurer’s failure to prevent the insured loss. On that reasoning, a policyholder generally could not recover damages for late payment of the indemnity itself, a position that left many businesses without redress even where delay had inflicted serious consequential harm. Section 13A changed that by creating an enforceable implied term requiring payment within a reasonable time. The full statutory text and the Explanatory Notes are available on legislation. gov.

uk and should be read in full before formulating any claim.

Relevant definitions

Three concepts underpin the section. The policyholder (or insured) is the party entitled to indemnity under the policy. The insurer is the party bound by the implied term to pay within a reasonable time. And payment means the sums due in respect of a valid claim, the section does not create an obligation to pay claims that are not in fact due. Critically, the section preserves the insurer’s right to dispute a claim: there is no breach of the implied term merely because the insurer investigates or contests a claim, provided it does so on reasonable grounds. The line between legitimate investigation and unreasonable delay is where the majority of late payment insurance claims uk are won or lost.

Note also that the implied term can be excluded or limited by agreement in non-consumer contracts, subject to the transparency requirements in the Act, but such a term has no effect in relation to a deliberate or reckless breach.

When does a delay become “unreasonable”?

There is no fixed statutory deadline. Section 13A frames the question as one of reasonableness assessed against all the circumstances of the individual claim. This is a fact-sensitive standard, which is both a strength and a challenge: it gives policyholders flexibility to argue their case, but it also means the outcome turns on careful marshalling of evidence rather than a mechanical calculation.

Factors courts and arbitral tribunals consider

The Act itself identifies several relevant considerations, and practitioners have built on these when framing unreasonable delay insurance claim uk arguments. The factors that typically carry weight include:

The size and complexity of the claim. A large, technically complex property or business interruption claim will justify a longer investigation than a straightforward, low-value indemnity.
Compliance with regulatory rules and guidance. The insurer’s adherence, or failure to adhere, to FCA claims-handling expectations is a relevant benchmark for what a competent insurer should have achieved.
Factors outside the insurer’s control. Genuine external causes of delay, such as awaiting third-party expert reports or the outcome of parallel proceedings, may be legitimate.
The conduct of the insurer. Poor communication, repeated requests for the same information, unexplained silence and shifting positions all point towards unreasonableness.
The conduct of the policyholder. If the insured delayed in providing information or cooperating, that will count against a late payment claim.

Practical examples and red flags

Certain patterns of insurer behaviour recur in successful late payment cases. Watch for a loss adjuster who acknowledges liability in principle but repeatedly defers quantification; an insurer that raises coverage points late, after months of engagement on quantum; a file that goes quiet for extended periods without explanation; and requests for documentation that has already been provided. Any of these, documented and set against the commercial harm the policyholder is suffering, builds the evidential picture of an unreasonable delay. Where judgments directly construing s.13A exist, those decisions, available on BAILII and, where relevant, from the appellate courts, should be cited with paragraph references to anchor the argument on the specific factors the courts have found persuasive.

Conversely, an insurer that communicates promptly, explains the basis for any investigation, sets and keeps timescales, and pays undisputed elements of a claim on account is far harder to characterise as having acted unreasonably. In-house teams evaluating late payment insurance claims uk should assess their own file honestly against these benchmarks before committing to proceedings.

Proving the claim, evidence and drafting tips

A s.13A claim is an evidence-led exercise. Two distinct propositions must be proved: first, that the insurer breached the implied term by failing to pay within a reasonable time; and second, that the delay caused recoverable loss. Each requires its own body of evidence, and the two must connect through a clear causal narrative.

Assemble the following core documents at the outset:

The policy and schedule. Including any late payment or interest clauses and any arbitration or jurisdiction provisions.
The notification of claim. The date and manner of notification, and the insurer’s acknowledgement.
The full claim correspondence file. Every letter, email, adjuster’s report and internal note obtainable, arranged chronologically.
Expert and quantum reports. Loss adjusters’, surveyors’ and forensic accountants’ reports bearing on both the underlying claim and the consequential loss.
Financial records. Management accounts, cashflow forecasts, financing agreements and evidence of any emergency borrowing occasioned by the delay.

Using disclosure in court

Where a claim proceeds to litigation, the disclosure regime under the Civil Procedure Rules obliges each party to disclose the documents on which it relies and those that adversely affect its case (with a distinct disclosure regime operating in the Business and Property Courts). For a late payment claim this is significant, because the insurer’s internal claims-handling notes, reserve calculations and adjuster instructions often reveal precisely why a claim was not paid. In-house counsel should preserve their own documents rigorously, and anticipate the categories of insurer documents they will seek, from the earliest stage. Under an arbitration clause the disclosure mechanism differs, but the underlying tactical objective, obtaining the insurer’s contemporaneous reasoning, remains the same.

Evidence for causation and loss mitigation

Causation is the hinge of a s.13A claim. It is not enough to show delay; you must show that the delay, rather than the underlying insured event, caused the loss claimed. The evidential burden is to demonstrate the counterfactual, what the policyholder’s position would have been had payment been made within a reasonable time. Equally, the policyholder must show it took reasonable steps to mitigate, because losses that could reasonably have been avoided are not recoverable. Document every mitigation decision and its cost, and be prepared to explain why more could not reasonably have been done given the absence of the insurance monies.

Witness statements and expert evidence

Factual witness statements from those who dealt with the insurer, and from finance staff who managed the consequences of non-payment, give the chronology a human and commercial voice. Expert evidence, typically from a forensic accountant, translates the counterfactual into figures. In many late payment insurance claims uk, the credibility of the quantum expert is decisive, because the tribunal must be persuaded that the modelled losses genuinely flowed from delay. An evidence chronology template, listing each date, event, source document and the loss then accruing, is an invaluable organising tool and often forms the backbone of the particulars of claim.

Quantifying damages under s.13A, approaches and worked examples

Quantification is the analytical heart of any late payment claim, and it is where the most value is either won or forfeited. The governing principle is compensatory: damages for late payment aim to put the policyholder in the position it would have occupied had the insurer paid the sums due within a reasonable time. That is a counterfactual exercise, and the discipline of building it rigorously determines the size and defensibility of the award.

The recoverable heads of loss commonly include lost profits arising from an inability to resume or continue trading; additional operating and remedial costs incurred because funds were not available; finance costs, such as interest on emergency borrowing or the cost of drawing down facilities; and, in some cases, wasted expenditure and losses on contracts that could not be performed. As with all contractual damages, recovery is limited by principles of remoteness, causation and the duty to mitigate.

Calculation methodologies

Three methodologies recur in practice. The cashflow approach models the business’s actual cash position against a counterfactual in which payment arrived within a reasonable time, capturing the incremental financing cost and any consequential trading impact. The profit-forecasting approach projects the profits the business would have earned but for the delay, based on historical performance, budgets and market conditions. Where losses accrue over an extended period, a net present value calculation discounts future losses to present value, and where losses were suffered in the past a corresponding adjustment for the time value of money may be applied.

The choice of methodology depends on the nature of the business and the loss, and expert input is usually essential to select and defend the right approach.

Use of experts

Forensic accountants build and stress-test the quantum model; actuaries may assist where long-tail or contingent losses are involved. The expert’s role is not merely arithmetical, it is to establish that the modelled losses are causally connected to delay, that the assumptions are reasonable, and that the methodology withstands cross-examination. Instruct the expert early, share the full financial picture, and ensure the expert engages directly with the counterfactual timeline rather than presenting figures in the abstract.

Worked example

Consider a manufacturer whose factory suffers fire damage. The insurer accepts the property claim in principle but takes eight months longer than a reasonable time to pay a £2 million indemnity. Because the funds were unavailable, the business could not reinstate its production line on schedule and lost profit on orders it could not fulfil. Assume the following purely illustrative figures: a reasonable time to pay would have been three months from notification; actual payment took eleven months; net monthly profit lost during the eight-month delay was £120,000; and the business drew down an overdraft facility of £2 million at an assumed rate of 9% per annum to bridge the gap.

The lost profit head is calculated as eight months at £120,000, giving £960,000, subject to evidence that these profits would in fact have been earned and could not be recovered later. The finance cost head is the interest on the £2 million facility over the eight-month delay period: £2,000,000 × 9% × (8 ÷ 12) = £120,000. Before finalising the figures, the model must deduct any costs saved during the shutdown and any profit subsequently recouped through catch-up production, and must credit any interest already awarded on the claim sum to avoid double recovery. On these assumptions, the indicative s.

13A damages, subject to mitigation adjustments, would be in the region of £1,080,000, a figure entirely separate from the £2 million indemnity itself. The example is illustrative only; every case turns on its own evidence and expert analysis.

How s.13A damages compare with other remedies

Remedy	When used	Measure of award / calculation	Pros	Cons
s.13A damages	Insurer paid, or is paying, but only after unreasonable delay causing consequential loss	Compensatory, losses flowing from delay (lost profits, finance and mitigation costs), on ordinary contract principles	Compensates real commercial harm; distinct from and additional to the claim sum and interest	Evidence-intensive; requires proof of unreasonableness, causation and quantum; fact-sensitive
Contractual interest / late payment clause	Policy or statute provides for interest on delayed sums	Rate specified in the clause or awarded at the court’s discretion on the sum due	Straightforward to calculate; no need to prove consequential loss	Interest alone rarely reflects true commercial loss from delay
Declaratory relief	Coverage or liability in dispute; policyholder needs certainty rather than money now	No monetary award, a binding declaration of the parties’ rights	Resolves coverage disputes; can be combined with a damages claim	Does not itself put money in the policyholder’s hands
Injunction / urgent relief	Delay threatens imminent, irreparable commercial harm	Court order compelling action or preserving the position pending trial	Fast; can prevent insolvency or contract loss	High threshold; requires urgency and often a cross-undertaking in damages
Settlement with structured payment	Commercial resolution preferred to litigation	Negotiated sum, potentially phased, reflecting claim and delay losses	Certainty, speed and cost control; preserves relationship	May under-compensate; depends on bargaining position

Remedies and procedure, court, arbitration and declaratory relief

Once you have decided that a late payment claim is worth pursuing, the next question is how. The available routes are not mutually exclusive, and the optimal strategy often combines them, for instance, seeking a declaration of liability while advancing a parallel damages claim.

Forum choice: arbitration clause considerations

The first thing to check is the policy’s dispute resolution clause. Many commercial insurance and reinsurance contracts contain arbitration agreements, which will generally require covered disputes to be arbitrated rather than litigated. Arbitration offers confidentiality and specialist tribunals, which can be attractive in a commercial insurance dispute uk, but it also carries cost and limited rights of appeal. Where there is a choice, weigh the desirability of a public precedent-setting judgment against the privacy and finality of arbitration. Preserve any right to arbitrate at the outset, commencing court proceedings in the face of a binding arbitration clause can lead to a stay under the Arbitration Act and wasted costs.

CPR timelines, pre-action protocol and Part 7 claims

For court proceedings, the Civil Procedure Rules govern the process. Before issuing, the parties are expected to comply with the Practice Direction on Pre-Action Conduct and Protocols: a clear letter of claim, a reasonable period for the insurer to respond, and genuine consideration of alternative dispute resolution. A substantive money claim is then typically issued under Part 7. In cases of genuine urgency, where delay threatens the policyholder’s survival, interim applications, including for interim payments or injunctive relief, may be pursued in parallel. The court will expect the pre-action steps to have been taken seriously, and unreasonable failure to engage in ADR can carry costs consequences.

Costs, security for costs and summary disposal

Litigation costs in England and Wales generally follow the event, meaning the losing party usually pays a proportion of the winner’s costs, subject to the court’s discretion and the conduct of the parties. Where liability is clear-cut, a policyholder may consider an application for summary judgment or an interim payment to accelerate recovery. Conversely, an insurer may seek security for costs in appropriate cases. Budgeting realistically for these procedural steps, and for the possibility of an adverse costs order if a claim fails, is an essential part of any decision to take legal action against insurer uk.

FCA Consumer Duty and claims-handling, the regulatory backdrop

The FCA’s Consumer Duty and its wider claims-handling rules (set out in the Insurance: Conduct of Business Sourcebook, ICOBS) do not create a private right of action for late payment, but they materially shape the environment in which s. 13A claims are assessed. The Duty requires firms to act to deliver good outcomes for retail customers, and the claims-handling rules set expectations for prompt, fair and transparent claims management. Where an insurer has fallen short of these standards, that shortfall can be relevant evidence of unreasonable conduct for the purposes of the s. 13A test.

The regulatory benchmark for what a competent insurer should achieve may inform, without dictating, the court or tribunal’s view of what a reasonable time to pay would have been.

In 2026, the FCA’s continued supervisory focus on consumer outcomes keeps this issue live. Published expectations and supervisory findings can be referred to in support of a late payment argument, though they remain persuasive rather than determinative. For commercial policyholders the Consumer Duty applies less directly, it is principally a retail measure, but general claims-handling standards and the tone of regulatory scrutiny still colour how delay is judged.

Tactical checklist and standard timeline for in-house counsel

Speed and organisation are decisive in late payment matters. The following staged approach helps in-house teams move efficiently from delay to resolution.

Days 0–7. Preserve the entire claim file and impose a litigation hold. Begin a contemporaneous chronology. Identify the losses already accruing and quantify the daily or weekly cost of continued delay.
Days 7–30. Review the policy for dispute resolution and interest clauses. Instruct a forensic accountant to scope the quantum model. Engage specialist counsel to assess the strength of the unreasonableness argument and the counterfactual.
Pre-action. Send a detailed letter of claim setting out the breach, the losses and the evidence. Comply with the pre-action conduct requirements and consider ADR. Preserve any right to arbitrate.
Issuing the claim. Where the pre-action process does not resolve matters, issue proceedings, by Part 7 claim or arbitration reference, and consider interim payment or urgent relief if the commercial position is critical.
Throughout. Continue to document mitigation efforts and their cost, and keep the quantum model current as losses evolve.

The “must do” priorities are simple to state and easy to overlook: preserve the file, obtain a credible quantification expert early, engage specialist counsel, consider interim relief where urgency demands it, and preserve any arbitration seat. A one-page timeline mapping these steps against dates is a practical control document for any in-house team managing late payment insurance claims uk.

Conclusion and next steps

Section 13A of the Insurance Act 2015 gives UK policyholders a genuine remedy where an insurer’s delay causes commercial harm, and the current regulatory climate makes late payment insurance claims uk more viable than ever. Success depends on rigorous evidence, disciplined quantification and the right procedural strategy, whether that is court, arbitration, declaratory relief or a combination. If your organisation is facing an unreasonable delay, act early to preserve the file and take specialist advice before losses compound. To explore your options, contact a member of the Global Law Experts network for tailored guidance.

Need Legal Advice?

This article was produced by Global Law Experts. For specialist advice on this topic, contact Manoj Vaghela at Wordley Partnership, a member of the Global Law Experts network.

Sources

FAQs

Can I take legal action against my insurance company for paying late?

Yes. Where section 13A of the Insurance Act 2015 applies, you can claim damages if the insurer failed to pay a valid claim within a reasonable time. You will need to prove the delay was unreasonable and that it caused recoverable loss. Preserve the claim file and take specialist advice at the earliest sign of harm.

What losses can I recover under s.13A for late payment insurance claims uk?

Recoverable heads typically include lost profits, additional operating and remedial costs, and finance costs such as interest on emergency borrowing. Recovery is subject to the usual contract principles of causation, remoteness and mitigation, so losses that were too remote or could reasonably have been avoided will not be awarded.

How long do I have to bring a claim?

Section 13A introduces a specific limitation rule: a claim for breach of the implied term must generally be brought within one year of the date on which the insurer has paid all the sums due in respect of the claim. This sits alongside the general six-year limitation period for contractual claims in England and Wales. Because limitation and policy terms can significantly affect timing, you should check both and obtain advice promptly rather than assuming you have ample time.

Do I need a solicitor to pursue s.13A damages?

These claims are evidence-intensive and turn on establishing unreasonableness, causation and quantum. Specialist counsel and a forensic accountant are strongly advisable. Various funding options may be available, including conditional fee arrangements and commercial litigation funding, which specialist advisers can help you evaluate against the value of your claim.

How are damages calculated?

Damages are compensatory, aiming to place you in the position you would have occupied had payment arrived within a reasonable time. Common methodologies include cashflow modelling, profit forecasting and net present value discounting. Expert evidence is usually required to build and defend the counterfactual and connect the losses to the delay.

Can I bring an urgent interim application to compel payment?

In appropriate cases, yes. Where delay threatens imminent, irreparable commercial harm, interim remedies including injunctive relief or an interim payment may be available. The threshold is high and urgency must be genuine, but for a business facing insolvency such applications can be decisive.

Will FCA Consumer Duty help my case?

The FCA’s Consumer Duty and claims-handling rules do not create a private right of action, but a firm’s failure to meet those standards may be relevant evidence of unreasonable conduct under s.13A. Regulatory expectations can inform how courts and tribunals assess a reasonable time to pay, though they are not determinative.