The importance of insuring property was covered in our pre-Christmas blog https://www.foskettmarr.co.uk/index.php/2017/10/nightmare-elm-street/v. However, simply obtaining insurance is not enough. As a recent case demonstrates, the insured party should also be aware of its obligations under the policy.
In the case of Bluebon Ltd v Ageas , a company took out buildings insurance with an insurer for a term of one year. Following a fire at the hotel, the company made a claim on its insurance however, the insurer refused to pay out. The insurer argued that that the company was in breach of a warranty in the policy and the Commercial Court agreed.
The relevant “warranty” was an Electrical Installation Inspection Warranty, which required the company to ensure that the electrical installation of the hotel “be inspected and tested every five years.” The Commercial Court interpreted this to mean that an inspection should have been carried out within the five years preceding the policy (or at the commencement of the policy) and as the company had not complied with this condition, the cover under the policy was suspended and the insurer was not liable to pay.
The policy in this case was drafted prior to the Insurance Act 2015, which gives insured parties some additional protection. Under the Act, if the insured party can show that its non-compliance could not have increased the risk of the loss that occurred in the circumstances in which it occurred, the insurers cannot escape liability.
Based on the Commercial Court’s comments, the Act would not have helped the company in the Bluebon case anyway as the warranty had been included in the policy to reduce the risk of fire and the hotel had been destroyed by a fire.
The case is a useful reminder of the importance of reading your policy documentation.
The above is only a summary of the case. For further advice on property matters, please contact our teams at Foskett Marr Gadsby & Head LLP (based in Epping and Loughton) on 01992 578 642 or see https://www.foskettmarr.co.uk/index.php/our-team/commercial-property-solicitor-essex/.
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