What's in store?
There is a new rule about warranties. In summary, the new rule is that a breach of warranty suspends the insurance. If a breach of warranty occurs, the insurance is of no effect until the breach is remedied. For example, a warranty that there is a working burglar alarm at the premises. If the burglar alarm breaks down, there is no insurance while it is broken. But once the engineer has come around and fixed it, the insurance continues.
What does it mean for you/your broker?
For insureds and their brokers, this could mean that they need to think a little differently about whether a policy with a warranty meets the insured’s needs. The first question is the same as before: can the insured comply with it? A second question might be, in the event of a breach of this warranty, how easy would it be to rectify? A broken burglar alarm might be quite easy to sort out. But if the warranty is about, say, asbestos at the premises, any asbestos discovered during the policy period be difficult to remove quickly. In the meantime the insured would not be!
What does it mean for your insurer?
For insurers and those who act for them on investigations and on coverage (such as loss adjusters and coverage counsel), there could be novel questions of fact and policy interpretation to grapple with. For some warranties it might not be clear what counts as ‘remedying’ a breach.
For example, would only a permanent fix count? Or could stop-gap repairs be enough in some situations?
Where a particular warranty is capable of being ‘remedied’, there could still be disputes of fact. The questions of whether, and if so when, the breach was remedied will be key to determining whether the loss being claimed will be indemnified.
Pop back tomorrow to read the next instalment:
- Monday: Duty of 'Utmost Good Faith'
- Tuesday: 'Material' Information
- Wednesday: ‘Basis of Contract’
- Today: Warranties
- Tomorrow: Misrepresentation/Non-Disclosure
About the author
|Joanne is a Solicitor and a Partner in the London office of Triton Global, an international firm of solicitors specialising in the defence of insurance claims. She practices in insurance law, including advising on coverage and drafting insurance policies. She also specialises in the defence of professional negligence claims against a range of professionals, but particularly solicitors, insurance brokers and clinicians. She enjoys singing with the Lloyd’s Choir and motorcycling (yes really).”|