Page 28 - The Insurance Times July 2025

(2) Condition Precedent to Liability: The condition is used (1) "Any rule of law permitting a party to a contract of
to describe a term that allows the insurers to discharge insurance to avoid the contract on the ground that the
themselves from liability for a particular loss that is utmost good faith has not been observed by the other
affected by the breach. If breached, they don't void the party is abolished".
policy ab initio, but bar the insured from staking a claim (2) "Any rule of law to the effect that a contract of
or recovering in respect of a claim that is affected by insurance is a contract based on the utmost good faith
the breach. The policy remains intact. It just affects the is modified to the extent required by the provisions of
claim or the liability that has been breached.
this Act and the Consumer Insurance (Disclosure and
(3) Condition Subsequent to Contract- These conditions, Representations) Act 2012.
when breached, don't render the policy void ab initio. (3) "Accordingly-(a) in section 17 of the Marine Insurance
However, the insurer can avoid the policy from the time Act 1906 (marine insurance contracts are contracts of
of breach, provided it occurs during the policy period. the utmost good faith), the words from ", and" to the
It is to be remembered that the policy remains in force end are omitted".
till the time of breach. An example is filing a fraudulent
claim. The policy can be avoided the moment the fraud For the benefit of readers, I would like to quote Section 17,
is proven. uberrimæ fidei, under the Marine Act 1906.
(4) Collateral conditions, or 'mere' conditions, are not
conditions precedent and are considered minor or "A contract of marine insurance is a contract based upon
collateral terms. The breach of such terms allows the the utmost good faith, and, if the utmost good faith be not
insured to claim under an insurance contract. These observed by either party, the contract may be avoided by
breaches don't go to the root of the contract. They are the other party".
inconsequential breaches, and the insurer should pay
such claims. The italic portion is deleted in The Insurance Act 2015 (UK).
The Act has modified the effects of condition precedent,
How do we ascertain whether a term is a particularly regarding pre-contractual misrepresentation.
condition precedent?
It depends on how the term has been framed. Where the The question of avoiding a policy because the Utmost Good
word Condition precedent is written there is no confusion. Faith has not been observed is now abolished. This is a clear
Similarly if it is mentioned that the insurer will not be liable indication of how laws are being drafted to make them
for the loss if the insured does not comply with the condition'; customer-friendly.
or the way it is mentioned in the condition 8 of Private Car
Policy -' The due observance and fulfillment of the terms, Let us examine the case referred to above as regards the
conditions and endorsements of this Policy in so far as they violation of the Limitation Clause from the perspective of
relate to anything to be done or complied with by the Insured UK Law. The Insurance Act 2015 (UK) by Section 11 (2) states
and the truth of the statements and answers in the said 'If a loss occurs, and the term has not been complied with,
proposal shall be conditions precedent to any liability of the the insurer may not rely on the non-compliance to exclude,
Company to make any payment under this Policy'. limit or discharge its liability under the contract for the loss
if the insured satisfies subsection (3) which in turn states that
The problem in India is that the conditions and warranties if 'The insured satisfies this subsection if it shows that the
are treated alike. Everything is treated as a breach of non-compliance with the term could not have increased the
condition. A breach of warranty has the same effect as a risk of the loss which actually occurred in the circumstances
condition. As a result, remedies for a breach of contract do in which it occurred'. Section 11 has added a 'Causation
not benefit Indian customers. There is no scope for collateral Dimension', ensuring that the breach of a term should have
or mere conditions. A violation of a mere condition entitles a causal connection with the loss mentioned. Should we not
the insurer to reject liability only if the breach of the condition consider such claims in India from this point of view?
was so severe that it went to the root of the contract.
Reference :
Certain developments in the UK Act - The Insurance Act 1. Marine Insurance Act 1906
2015 - Part 5 of this Act deals with Good Faith and 2. IA Act 2015
Contracting Out. The part under the caption "Good faith" 3. Fire Insurance Law and Claims - E.J.D. Peverett -FCII
under Section 14 mentions 4. Insurance Law MO5 -Chartered Insurance Institute .

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