End of Chapter - Insurance contracts and key terms

Question 1

What rules of construction assist in resolving disputes?

Answer 1

Statutory rules - the Consumer Rights Act 2015 imposes requirements fairness and the use of intelligible
Common law rules - relating to word’s ordinary meaning, technical or legal meaning, context (noscitur a sociis and ejusdem generis) and the contra proferenterm rule in cases of ambiguity

Question 2

What is a warranty?

Answer 2

A promise made by the insured relating to facts or to something they agree to do, or not to do
Continuing warranties are often applied by insurers to ensure that good management is observed

Question 3

How can warranties arise?

Answer 3

Expressly, when clearly stated in the policy, or marine insurance can be implied as well as express

Question 4

Insurance Act reform?

Answer 4

Consequences of a breach of warranty pre-IA 2015 reforms viewed to be draconian.
The reforms mitigated the harsh consequences

Question 5

Liability after breach of warranty

Answer 5

An insurer has no liability under an insurance contract for any loss that happens after a warranty has been breached, but before the breach has been remedied
Insurance cover is suspended from when the insured breaches the warranty until it is remedied
- Note: insurers do not have to prove connection between breach and loss unless the warranty is intended to reduce the risk of a loss (IA 2015 s.11)

Question 6

Condition breach precedent to contract

Answer 6

If a condition precedent to the validity of the policy is never fulfilled, the contract never comes into existence

Question 7

Breach of condition precedent to liability

Answer 7

Insurers are not liable under the contract unless the condition precedent to insurer’s liability is satisfied
When a condition precedent to insurer’s liability is breached, the insurer is automatically discharged from the claim that is tainted by the breach
Under IA 2015, the insurer may not rely on on non-compliance to the actual loss to exclude, limit or discharge its liability if the insured shows that non-compliance with the term could not have increased the risk of the loss
- when a condition precedent to insurer’s liability is a claim provision, section IA 2015 does not apply and the insurer is not liable

Question 8

Breach of collateral (or mere) condition

Answer 8

The remedy depends on the seriousness of the breach

Question 9

Joint and composite insurance

Answer 9

The distinction between the two hinges on the interests of the insured persons.
A joint policy is ‘indivisible’ so one breach may cause the whole policy to fail
A composite policy may invalidate their own cover without affecting the right of the other insured persons
A composite policy can be viewed as a bundle of separate contracts