A recently published judgment of the Court of Appeal has re-emphasised that courts will construe clearly worded conditions precedent strictly against the insured. This is so even where the insured has acted reasonably in breaching the condition.
In Anders & Kern Ltd v CGU Insurance Plc, the court considered a condition precedent in a property damage policy that required the insured warehouse to be attended by at least one responsible person at any time that it was not protected by an intruder alarm. The alarm at the insured’s premises was not working and the insured’s managing director was notified and attended the premises. The managing director claimed however that he did not feel safe in the premises, and therefore left them unattended over night. During this time, the property was burgled.
The Court of Appeal was faced with three issues.
1. Did the claim fall within cover for theft involving violence or threat of violence to identified people? If so, then the condition precedent would not apply.
The Court of Appeal held that for a claim to fall within this section of policy this required the actual use or threat of violence towards those identified people, rather than simply that an identified person reasonably feared violence towards him. This claim did not fall within this limb of the insuring clause, and the condition precedent therefore applied.
2. Was the condition precedent subject to an implied term that where the intruder alarm was not fully operational, there would still be cover even where the responsible person left the premises unattended because he would have been or reasonably perceived that he would have been at risk of personal violence had he remained there?
The Court of Appeal held that there was no such implied term. It was the mutual intention of the parties as expressed in the policy that the insured would bear the risk where premises were left unattended with the alarm system not fully operational, and thefts occurred during that period. The fact that the responsible person had acted reasonably was irrelevant. The risk that the insurer agreed to cover was one where either the intruder system was operational, or the premises were attended by a responsible person. If neither of these was satisfied, there was no cover.
3. The condition precedent to indemnity was subject to a proviso that the insurer might “agree otherwise”. The Court of Appeal held that there was no obligation to give retrospective agreement to waive the condition precedent where the insurer was being asked to agree to assume a materially increased risk, namely cover for a warehouse which had neither an operative alarm system nor a responsible person present on site.
Comment
The constant strand running through the Court of Appeal’s decision is that the insured and insurers clearly agreed to the allocation of risk at the outset, as was clearly reflected in the terms of the policy. The court was not willing or prepared to imply terms which altered the allocation of risk that had been bargained for.
Consequently, in this case, the fact that the insured had acted reasonably in leaving the premises was legally irrelevant. The insurer did not agree to cover the risk of unattended premises which were unprotected by a security alarm. This claim was, therefore, not covered.
Further reading: Anders & Kern UK Ltd (T/A Anders & Kern Presentation Systems) v CGU Insurance Plc (T/A Norwich Union Insurance)
