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A recent case highlights the changes that will be coming into effect next year when the Insurance Act 2015 comes into force, reducing the number of ‘technical’ defences that can be used by insurance companies to avoid paying out on claims.
The case involved a company which made a claim against its insurance policy after its premises suffered a fire outside business hours and there was a considerable consequential loss.
The insurance company declined to meet the claim because, at the time of the fire, the company’s intruder alarm was not operational and the policy contained a clause requiring it to have an operational intruder alarm turned on and monitored at all times when the premises were not in use.
The presence of this ‘condition precedent’ was held by the court to be sufficient to deny the claim, because the absence of a monitored alarm created a real risk that the insurer would suffer a detriment. The company had therefore breached its obligations to the insurer.
Under the Act, the success of such a claim would depend on whether or not the company’s breach of the policy conditions increased the probability of a loss by fire. This is a rather more difficult argument for an insurer to sustain.
A breach of the conditions of your insurance policy is always likely to lead to a battle and is best avoided. However, when the Act comes into force, policyholders will be more confident that technical breaches of insurance policies will be much less likely to lead to a denial of their claim.
Insurance claims are often contentious. We can advise you in the event of a dispute with your insurance company.