A policy which is not renewed at or before the expiration of the current period of insurance or of the days of grace, if any, is said to ‘lapse’, and the assured cannot enforce it in respect of any claim arising afterwards. It may, however, be ‘revived’ at any time by mutual consent and the insurers may be precluded by their contract from relying on its lapse.
A request for the premium made by the insurers after lapse is an offer on their part to revive the policy, and the payment of the premium by the assured is his acceptance of the offer; hence, a refusal to pay the premium prevents any revival taking place. Similarly, a tender of the premium by the assured is an offer on his part to revive the contract, and the receipt and retention of the premium by the insurers constitute their acceptance of the offer. Before agreeing to revive the policy, the insurers may impose fresh terms and conditions and, if they do so, there is no revival unless and until the terms and conditions imposed are accepted and performed by the assured.
Any conduct on the part of the insurers which reasonably leads the assured to believe that the policy is still a subsisting policy precludes them from relying on its lapse. Thus, the giving of a receipt containing ambiguous phraseology which may reasonably be construed to mean that the policy is still alive, is, perhaps, sufficient.
A revival is not a continuation of the old contract, but the making of a new contract. Thus, although, in practice, a revived policy is usually ante-dated to the expiration of the last period of insurance under the lapsed policy, a claim arising before the actual date of revival is not covered, unless the parties clearly so intended. Acceptance of the premium by the insurers in ignorance of the loss is not sufficient proof of intention.