Page 27 - The Insurance Times July 2025

'Terms implied in law' are terms - the law automatically option. However, it doesn't render it voidable as long as the
applies to the agreement. Most medicines are sold by breach is in respect of a material particular. The above
description of their ingredients; there is an implied condition modification, therefore, allows the insurer to disregard
that the medicine will correspond to the description of its inconsequential misdescriptions, misrepresentations, and
ingredients. non-disclosures if it chooses to do so.

There are four implied conditions in an insurance contract. We observe another such modification in the Private Car
The first implied condition states that the insured must have insurance policy. The Condition 8 of Private Car Policy states,
an insurable interest in the subject matter of insurance. In 'The due observance and fulfillment of the terms, conditions
marine insurance, this insurable interest must exist at the and endorsements of this Policy in so far as they relate to
time of the loss. However, this interest must also exist in a anything to be done or complied with by the Insured and
fire policy at the time of insurance commencement. The the truth of the statements and answers in the said proposal
second implied condition states that the subject matter shall be conditions precedent to any liability of the
insured must exist at the commencement of the policy. An Company to make any payment under this Policy'.
example could be someone insured 100 goats with an
insurance company, but there were only 87 goats at the The above express condition significantly modifies the impact
commencement of the insurance policy. It clearly shows that of the implied conditions. The policy does not become void
the subject matter stated for insurance didn't exist. ab initio or voidable. Only the affected liability or claim
becomes voidable. The policy remains intact, and so do the
The third implied condition states that the subject matter previous claims and subsequent claims, except for the claim
shown in the policy must be adequately described so that it that was affected. Suppose a claim was not reported on time,
can be identified easily and beyond any doubt. An example
or proper investigation in the event of theft was delayed by
could be a person owning multiple shops with the same name the insured, the insurer may still pay the claim by deducting
on the same floor of a mall, but located in different areas. a certain amount if such delays didn't significantly affect the
All these shops must be accurately described, including their outcome of the claim. The above express condition provides
proper shop numbers and important landmarks, such as
significant relief to customers and serves as a good example
nearby shops, to identify them beyond a reasonable doubt
of customer-centric policy wordings.
when taking an insurance claim.
The fourth implied condition states that all parties to the Consider a scenario: a private car was used as a commercial
insurance contract must abide by the principle of 'Good vehicle to carry passengers. There was an accident. The
Faith' with one another in negotiations until the contract is limitation to the use had nothing to do with the accident,
concluded and remains in effect. as per the survey report. The above example is a clear
violation of the 'Limitation to Use' Clause. This clause is part
Express Conditions of the General Exception and categorically states that the

The conditions printed or endorsed on the policy are termed company shall not be liable for such loss. Should a claim
Express Conditions. There are three types of Express manager straightaway reject the claim on this count? As
Conditions: (1) Express conditions that explain the Implied noted above, these conditions must be fulfilled by the
Condition, (2) Express conditions that modify or add to an insured, enabling the insurers to take certain actions.
implied condition. (3) Express conditions that limit the
liability of an insurer, endow rights in the insurer and enforce Clear understanding of terms like Precedent and Subsequent
requirements on the insured. These terms relate to the timing of an event that brings a
contract into operation or bars a claim from being
As stated above, express conditions can modify implied recovered. They relate to both implied and express
conditions. Condition No. 1 of the Standard Fire and the conditions and fall into three broad categories :
Special Perils policy, which states, 'THIS POLICY shall be (1) Condition Precedent to Contract: These conditions, if
voidable in the event of mis-representation, mis-description breached, render the contract void ab initio. In other
or non-disclosure of any material particular' is an example words, the policy will not take effect if the insured fails
of such modification. If you consider the implied condition to comply with the policy's terms. For example, if the
'no-3', you will observe that misdescription may allow the subject matter of insurance didn't exist at the time of
insurer to avoid the policy from the outset. However, once taking the policy. In simple words, if the terms
it is made an express condition, the effect of the condition precedent to contract are not fulfilled, the contract
changes. The policy now becomes voidable at the insurer's doesn't come into existence.

24 July 2025 The Insurance Times