A policy of insurance usually or incorporates a variety of terms.
Some terms are known as ‘conditions’ on the fulfillment of which the validity of the policy or the liability of the insurers depends.
Other terms, however, do not amount to ‘conditions’. Non-fulfillment of these does not affect the validity of the policy nor the liability of the insurers, but entitles them to recover in a cross-action such damages as they may have sustained by reason of the non-fulfillment.
A. THE CLASSIFICATION OF CONDITIONS
Conditions may be classified:
1. As implied and express condition
2. According to the time when they come into operation.
1. Implied and express conditions
There are certain conditions which govern the validity or effect of every policy of insurance unless it clearly appears to have the intention of the parties to exclude them or to modify their operation; and it is therefore unnecessary for them to be expressed in the policy. The implied conditions are the following:
i. That the parties shall observe good faith towards each other at all material times and in all material particulars;
ii. That there is a subject-matter of insurance in existence at the time when the policy is effective;
iii. That the subject-matter of insurance is so described in the policy as clearly to identify it and to define the risk undertaken by the insurers;
iv. That the assured has an insurable interest in the subject-matter of insurance.
These are the only conditions which may be implied in any policy of insurance. If it is wished to impose any further obligations on the assured and to make their fulfillment a condition, it is necessary to insert in the policy express stipulations to that effect.
Thus, it is not an implied condition of the policy:
i. That all representations made by the assured during the negotiations shall be true;
ii. That the policy shall not attach until the premium is paid;
iii. That the risk shall not, during the currency of the policy, be altered;
iv. That the assured shall not, during the currency of the policy, effect a similar policy with other insurers;
v. That the assured shall give particulars of his claim to the insurers before instituting proceedings on the policy;
vi. That, if, at the time of the loss, there are other subsisting insurances covering the same subject-matter, the insurers shall not be liable to the assured for more than a rateable proportion of the loss.
(b) Express conditions
It is the practice of insurers to insert in their policies express conditions to the effect of those conditions which would otherwise be implied by law. Such conditions may have the effect of extending or restricting the scope of the implied conditions, or of excluding any condition not clearly expressed. It is, therefore, necessary in any particular case to consider the language of the condition employed.
Thus, by virtue of an express condition, a misrepresentation or non-disclosure of a material fact may not avoid the whole policy, as it would do in the absence of the condition; it may avoid it as regards the particular portion of the subject-matter in respect of which the misrepresentation or non-disclosure is committed, without affecting the validity of the policy in respect of the remaining portions of the subject-matter.
It is further open to the parties to make any stipulation in the policy a condition provided that their intention to do so is clearly shown. It is immaterial for what purpose it is introduced.
A stipulation, which would not otherwise be a condition, may be made a condition by express language for the purpose of protecting the insurers. The breach of a stipulation which is not a effect on the validity of the policy or on the liability of the insurers; however greatly the breach of the stipulation may have prejudiced them, they remain liable on the policy, and their only remedy is an action for damages, a remedy which, in practice, affords them little or no protection. In order to secure the fulfillment of the stipulation, therefore, it is the practice of insurers to make the various stipulations to which they attach importance conditions, on the fulfillment of which the validity of the policy or the liability of the insurers depends.
There is no obligation on the insurers to relate a condition to a particular aspect of the policy.
The principal express conditions in use relate to the following matters:
i. Misrepresentation, misdescription, or non-disclosure in any material particular;
ii. Increase of risk;
iii. Alienation of interest;
iv. Payment of the premium;
v. Notice and particulars and proofs of loss;
vi. Fraudulent claims;
vii. Rights of the insurers upon loss;
viii. The existence of other insurances;
ix. Arbitration.
2. Classification of conditions with reference to time of operation
Conditions may also be classified with reference to the time when they come into operation. These may be divided into:
a. Conditions precedent to the validity of the policy;
b. Conditions subsequent of the policy; and
c. Conditions precedent to the liability of the insurers.
(a) Conditions precedent to validity of the policy
Such conditions relate to matters which precede the formation of the contract contained in the policy, and which are, or are agreed by the parties to be, essential to its validity. They must be fulfilled; otherwise the policy never attaches, but is void ab initio.
Thus, it is or may be made a condition precedent of the policy;
i. That the assured shall discharge his duty of disclosure;
ii. That all statements made during the negotiations by the assured shall be true;
iii. That the subject-matter of insurance is in existence;
iv. That the subject-matter of insurance is adequately described;
v. That the assured has an insurable interest in the subject-matter of insurance.
(b) Conditions subsequent of the policy
Such conditions relate to matters which arise after the formation of the contract contained in the policy, and which are, or are agreed by the parties to be essential to its continued validity. They must be fulfilled; otherwise the policy ceases to attach, and, though not void ab initio, may be avoided as from the date of the breach.
Thus, it is or may be made a condition subsequent of the policy:
i. That the assured shall not voluntarily alienate his interest in the subject-matter of insurance.
ii. That the assured shall not alter the risk as defined in the policy;
iii. That the assured shall not effect a similar policy with other insurers;
iv. That either or both of the parties shall be entitled to determine the contract on notice;
v. That the assured shall not be guilty of fraud in connection with any claim put forward under the policy.
(c) Conditions precedent to the liability of the insurers
Such conditions relate to matters arising after a loss under the policy and define the circumstances in which the liability of the insurers is to arise. They must be fulfilled; otherwise the liability of the insurers never arises.
It is, or may be made, a condition precedent to the liability of the insurers:
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i. That the premium shall be paid;
ii. That notice, particulars and proof of loss shall be given within a prescribed time:
iii. That the assured shall assist the insurers to investigate and ascertain the cause and extent of the loss;
iv. That the liability of the insurers shall be determined by arbitration;
v. That the liability of other insurers under similar policies covering the same loss shall be taken into account.
vi. That no admission of liability or offer or promise of payment shall be made without the written consent of the insurers.
vii. That if the insurers disclaim liability to the insured, he must institute legal proceedings against them within a specified period of the date of the disclaimer.
In January 1957 the Law Reform Committee in their Fifth Report stated that the presence of such clauses was a very valuable protection to the insurers since their function was usually to facilitate prompt investigation after a loss, to ensure control by the insurers of any litigation or negotiations with third parties, or to protect their interest in matters of salvage or subrogation. They were not normally calculated to be prejudicial to an insured who took the trouble to read his policy, except perhaps the condition, common in certain types of policy, which required notice of loss to be given within so many days. Circumstances might arise which rendered compliance with such a condition impossible, e g where the discovery of one irregularity on the part of an employee led to the discovery of a series of embezzlements in the past, the presence of such a clause in a fidelity policy taken out to insure against such losses would entitle the insurers to refuse compensation for any of the losses except the last.
B. WHAT CONSTITUTES A CONDITION
The question whether a particular stipulation is a condition or not depends on the intention of the parties, as shown in the language which they have selected to express their meaning. It is not a question of fact, but a question of pure construction, to be determined by the Court in accordance with the ordinary rules of construction after looking at all the terms of the policy. A condition need not be expressed in precise technical language; nor need it occupy any particular place in the policy.
A stipulation which, in addition to imposing an obligation on the assured, further requires that his failure to perform it shall render the policy null and void, or preclude him from recovering under the policy, is clearly intended to be a condition.
In the same way, if the performance of the obligation is declared to be the basis of the contract, the stipulation is to be construed as a condition. On the other hand, a declaration that its performance is to be of the essence of the contract, is not, perhaps, sufficient proof of intention to make the stipulation a condition.
A stipulation which on the face of it is called a condition precedent, warranty or proviso will usually be construed as a condition precedent. The use of the word ‘condition’ alone is not in itself decisive.
A stipulation relating to matters which clearly go to the root of the whole contract, such as a term directly affecting the risk, or which are essential to the existence of liability on the part of the insurers, will be construed as a condition. The nature of the contract, even without any express stipulation to that effect, makes it clear that the parties intended to give the stipulation the effect of a condition. No particular form of words is, therefore, necessary; the matters to which the stipulation relate are so material that the intention of the parties to make the stipulation a condition is beyond doubt, and necessarily involved in the mere fact that the stipulation is made, seeing that it is inconceivable that the insurers would have contracted on the footing that the stipulation was to be enforced only by a cross-action by the insurers against the assured after loss.
Thus, a stipulation to the effect that the assured will not, during the continuance of the policy, commit suicide or that the rate of premium is the same as that payable under another policy, or that the death of an insured animal is to be duly certified by a qualified veterinary surgeon or that particular kinds of goods are not to be kept on the premises, is to be construed as a condition, the breach of which avoids the policy.
A stipulation relating to matters which do not go to the root of contract, or which are not essential to the liability of the insurers, but are merely collateral to the main contract, is not to be construed as a condition unless the stipulation on the face of the policy clearly and precisely shows that it was the intention of the parties to make its fulfillment a condition precedent. It is the duty of the insurers, since the stipulation is framed by them for their protection, to make it clear that the stipulation is intended to be a condition. Where, therefore, the words used are ambiguous, the stipulation will not be construed as a condition.
A stipulation which is grouped with a number of other stipulations under the general heading of ‘conditions’ or ‘conditions precedent’ is not merely on that account, necessarily to be construed as a condition precedent; and it makes no difference that the policy contains an express declaration that the stipulations comprised under the heading are to be conditions precedent. Though the effect of the heading or declaration is the same as if a similar heading or declaration was repeated at the beginning of each separate stipulation, it raises at most, a general inference of intention, which is liable to be rebutted.
The stipulations which, in practice, are grouped together under such a heading, relate to all sorts of matters, some going to the root of the contract, others involving mere matters of detail; they also vary in their language, some containing a provision that in case of non-fulfillment the policy is to be void, others containing no such provision, and some of them may, from their nature, be incapable of being construed as conditions precedent. In this case, the inference is that the heading is nothing more than a general indication of the character of the stipulations which follow it, and that the several stipulations are to be judged independently as meaning what they individually say; those which are intended to be conditions precedent show themselves to be so intended either by the subject-matter to which they relate or by express words, and the remaining stipulations, therefore, are not to be construed as conditions precedent.
A stipulation must be construed as a whole; if part of it is or is not a condition precedent, the rest of it equally is or is not a condition precedent. Where several independent stipulations imposing different obligations are combined in one clause or ‘conditions’ or the policy, the clause or condition may be treated by the Court as being severable. One or more of its stipulations may be construed as conditions precedent, whilst the others may be construed otherwise
The mere fact that the stipulation appears on the face of the policy does not necessarily render it a condition precedent. In this respect fire insurance appears to resemble life insurance and to differ from marine insurance where it has long been the rule that statements bearing on the risk introduced into the policy are to be construed as warranties.
On the other hand, the stipulation is not prevented from being a condition precedent by the fact that it does not appear on the face of the policy. It may be endorsed on the policy, or may be contained in another and separate document, such as the proposal, provided that it is incorporated into the policy by express words or otherwise. The question whether such stipulation is a condition precedent is determined in the same way as if it were contained in the policy itself.
Where a stipulation thus incorporated is inconsistent with a stipulation contained in the policy itself, the question as to which of the two is to be taken as the true condition precedent intended by the parties is a matter of construction. Prima facie, the policy, being the later document, prevails; but if the stipulation contained in the policy is more disadvantageous to the assured, the maxim verba chartarum forties proferentem accipiuntur applies, and the incorporated stipulation is taken to express the real intention of the parties.
Although generally a stipulation which is expressed to be a condition precedent will be construed as one this rule will not apply where the stipulation appears to be so capricious and unreasonable that the Court ought not to enforce it. Thus, a stipulation empowering the insurers to terminate the insurance at any future time on account of a past delay of the assured in payment of the premium, or a payment elsewhere than at the place specified, by reason of such payment not being made a payment in strict accordance with the policy, might well be held to be unreasonable. Further, it has been doubted whether a stipulation in a fire policy for a definite period that, in case of the death of the assured during the period, the policy may be continued by the personal representatives, provided that an indorsement to that effect is made within three months after his death, can be construed as a condition.
Where the stipulation is in its nature incapable of being made a condition precedent, the Court will not construe it as one. Thus, a stipulation which does not relate to time at all is not a condition precedent; and a stipulation which relates to things to be done after the payment under the policy is due, such as, e g assisting the insurers to obtain reimbursement of the amount which they have paid, is not a condition precedent, but a condition subsequent.
The time for performance must, however, by the terms of the stipulation be necessarily postponed until after the date for payment under the policy; and the fact that no time for performance is specified does not show that the obligation must be treated as if its performance was referable to a period subsequent to such date, and could not be insisted on at an earlier period.
Even where the stipulation is, on its face, capable of being fulfilled either before or after the date of payment, the fact that the parties have expressly declared it to be a condition precedent is sufficient to limit the time for performance to the antecedent period.
C WHETHER PERSONAL FULFILMENT OF THE CONDITION BY THE ASSURED IS NECESSARY
The responsibility for the fulfillment of a condition lies in the first instance on the assured; and the condition may by reason of its subject-matter or by its express terms require him to fulfil it personally. Thus, where the policy provides for payment of a renewal premium by the assured personally, payment after his death, but during the days of grace, by his personal representatives is not sufficient.
Except, however, where the condition involves or prescribes acts to be done by the assured personally, they may be done by his agent, or personal representatives, or trustee in bankruptcy, or even, it seems, by a stranger on his behalf.
Sometimes a condition requires acts to be done or left undone by third persons, in which case there is no fulfillment of the condition unless such persons do or leave undone the acts contemplated; nevertheless the assured is responsible.
D. BREACH OF CONDITION
1. What constitutes a breach
In order to ascertain what constitutes a breach of a condition, it is necessary consider not only the precise language in which the condition is framed, and the circumstances to which it is intended to apply, but also the act which the assured has, in fact, done or left undone.
Where the condition is general in its terms, and does not enter into a precise and detailed specification of what is required, a reasonably substantial compliance with it is sufficient. The insurers cannot, therefore, rely on the fact that the performance is incomplete in the sense that the terms of the condition might have been more closely complied with, provided that the matters, as to which there has been a failure in performance, are not so material as to prevent what has been done from being reasonably considered as a performance.
As regards matters with which the condition specifically deals, a literal performance is required, a substantial performance only being insufficient. If therefore, the condition goes into details, the details must be literally fulfilled, and it is no defence for the assured to assert that such details are immaterial. Thus, in Roberts v Eagle Star Insurance Co Ltd:
Again, in Princette Models Ltd v Reliance, Fire and Accident Corpn Ltd:
Some ladies dresses were insured under a goods in transit policy which provided that the insurance company would not be liable should they be stolen from an unattended motor vehicle unless all doors and windows were left closed, securely locked and properly fastened’. The dresses were stolen from an unlocked vehicle.
Held, the insurance company was not liable.
Nor can claim that part only of the condition is essential, and that the rest of it may be rejected, since the condition must be taken as a whole. The condition is, however, performed when all that the condition actually requires has, in fact, been done. The assured cannot be called upon to do more, and it is not open to the insurers to allege that a literal performance is not sufficient for their purpose, since they could have made the condition more stringent in its terms.
On the other hand, the assured cannot substitute other terms and conditions in lieu of those which the parties to the contract have originally made.
The cause of the breach of condition is immaterial. The breach may be deliberately committed by the assured, or it may be due to his negligence, inadvertence, or error of judgment, or even to his ignorance of the facts bringing the condition into operation. It makes no difference whether he was honest or guilty of fraud.
There is equally a breach where the failure to fulfill the condition is due to circumstances beyond the assured’s control, as, for instance, where a third person declines to do an act required by the condition; for the fact that in the events that happen fulfillment of the condition is rendered impossible does not excuse its non-fulfillment. Where, however, the condition is impossible of fulfillment ab initio, it is a nullity, and the failure to fulfill it has no effect upon the validity of the policy. Thus, where a condition in a personal accident policy required a report to be furnished by the assured’s medical attendant, the failure to furnish a report might not be fatal if he had no medical attendant.
There is no breach of the condition where he does not know and has had no opportunity of knowing of the existence of the condition at the time when it ought to have been fulfilled. Thus, a condition in an employer’s liability insurance policy prescribing the time within which notice of the accident is to be given to the insurers is not broken by the assured’s failure to give the notice within the prescribed time, if at the time of the accident the policy was still in the possession of the insurers, since the condition does not bind him.
The onus of proving his knowledge or opportunity of knowledge, as the case may be, lies on the insurers.
A mere intention to commit a breach of condition does not of itself constitute a breach.
2. Burden of proving a breach
The burden of proving that a condition has been broken rests on the insurers. The words of the policy, however, may change the burden the burden of proof and make in the duty of the insured to prove that he has not broken a condition. But in order for them to have this effect the words must be clear.
In Bond Air Services Ltd v Hill:
A Lloyd’s aircraft contained stating, ‘The insured and all persons in his employment…shall duly observe the statutory orders, regulations and directions relating to air navigation for the time being in force’. Another clause stated that the observance and performance by the insured of the conditions of the policy were of the essence of the contract and were conditions precedent to his right to recover. The insurance company denied liability for the loss of the aircraft, claiming that the burden proving that the condition had been complied with lay on the insured.
Held, that the burden of proving that there was a breach of condition still lay on the insurance company.
Lord Goddard CJ said:
‘But I cannot find that [some earlier] cases have ever been regarded, either in any judgment on in the opinion of eminent text writers as throwing doubt on what I think is axiomatic in insurance law, that, as it is always for an insurer to prove an exception, so it is for him to prove the breach of a condition which would relieve him from liability in respect of a particular loss. The [insurance company’s] contention no doubt is that, by providing that the observance of conditions is to be a condition precedent to his liability to pay, the policy has shifted the onus on to the [insured]. I do not doubt that the parties to a policy can use words which would relieve insurers of the onus and cast it on the assured, as they might with regard to any other matter affecting an insurer’s liability…but, in my opinion much clearer words than are used here would be necessary to change what I think, certainly for a century and probably for much longer, has always been regarded as a fundamental principle of insurance law, that it is for the insurers who wish to rely on a breach of condition to prove it.’
3. The effect of a breach
A breach of condition affects the rights not only of the assured, but also, in the absence of an express condition to the contrary, of his personal representative, trustee in bankruptcy, or assignee or any other person claiming through the assured.
The insurers can rely on a breach of condition even though the breach has not prejudiced them.
(a) The usual effect
The precise effect of the breach depends, however, on the nature of the condition broken, for it will vary according as to whether the condition is one precedent to the validity of the policy or whether it is a condition subsequent or whether it is a condition precedent only to the liability of the insurers.
i. Condition precedent to the validity of the policy
A condition precedent to the validity of the policy must be performed before the policy can become operative. If, therefore, a loss happens before it is preformed, it is immaterial whether the loss is occasioned by the failure to perform it or not. The assured cannot recover on the policy, even in respect of property covered thereby to which the condition does not relate, or as to which it is not broken. In the absence of fraud, however, he is entitled to the return of any premiums which he may have paid as on a failure of consideration.
ii. Condition subsequent of the policy
The breach of a condition subsequent avoids the policy from the date of the breach. The assured cannot, therefore, recover in respect of any loss happening afterwards, even though the loss is in no way caused or affected by the breach. If, however, the loss takes place before the breach, he is not precluded from recovering in respect of it, since the policy, at the time of the loss, was still operative.
iii. Condition precedent to the liability of the insurers
The breach of a stipulation which is a condition precedent only to the liability of the insurers, does not affect the validity of the policy, but prevents the assured, in case of loss, from recovering anything under the policy, unless and until, where it is still possible, the condition is performed. In such a case, therefore, he is not entitled to any return of premium.
A breach does not, however, affect the validity of the policy, but only precludes the assured from recovering for the loss in respect of which the breach is committed; he is not precluded from recovering for a subsequent loss during the currency of the policy, provided that on the second occasion the condition is fulfilled.
(b) Where a particular penalty is provided<.h3>
Where the insurers have stipulated penalty for breach of a stipulation, e g an increased premium, they are limited to that penalty and cannot avoid the policy.
4. Waiver of breach of condition
(1) Waiver by the insurers: What constitutes a waiver
The insurers may, if they think fit, elect to waive the breach of any condition, and thus affirm the policy. If they so elect, the policy is treated as in force in the same way as if the condition had been performed. There is, however,, no waiver, unless the insurers are fully acquainted with the facts relating the breach.
The insurers despense the assured from the necessity of performing a condition, or may be stopped by their conduct from insisting upon its performance, and in these cases a failure to perform the condition may be disregarded.
(a) Waiver of breach already committed
It is not necessary that a waiver of a breach of condition should be in writing, unless there is an express condition to that effect. A parol waiver by the insurers, or by their agent, acting within the scope of his authority, is sufficient.
There may also e a waiver conduct; if the insurers do an act which can be justified only on the footing that the policy is in force, they are precluded from contending that the policy is avoided by the breach of condition. There must be some positive act done by them which is inconsistent with the avoidance of the policy.
They are equally precluded from relying on the breach where their conduct misleads the assured and induces him to alter his position in the belief that the policy is valid. Thus, the acceptance of the premium or the proceeding to arbitration on the footing that the policy is valid, with actual knowledge of the breach, is a waiver.
On the other hand, conduct which does not mislead the assured does not constitute a waiver. An intention to waive cannot be inferred from mere silence, or even from equivocal acts on the part of the insurers which are unknown to the assured. Thus, a failure to give notice that a renewal premium has not been paid does not preclude the insurers from relying on its non-payment. Similarly, the failure to raise a particular grounds may be a waiver of the ground of objection which is not specifically raised.
When the insurers discover that there has been a breach of a condition entitling them to avoid liability under the policy, they can elect to refuse to pay the sum insured or to accept liability or to delay their decision. Mere lapse of time does not lose them right ultimately to decide to refuse to indeminity. The lapse of time only operates against them if thereby there is prejudice to the insured or if in some way rights of third parties intervene or if the delay is so long that the Court feels that the delay in itself is of such a length as to be evidence that they have in truth decided to accept liability.
Thus, in Allen v Robles (Campagine Parisienne de Garantie, Third Party):
By a condition in a motor insurance policy the insured was required to advise the insurers ‘immediately he has knowledge of a claim and at the latest within 5 days…’ On April 9, 1967 he drove his car in such a dangerous manner that he collided with a house belonging to a third party, and caused him personal injuries. In July 1967 he informed the insurers that a claim had been made against him by the third party. On November 29, 1967 the insurers informed the third party that they would only pay for his personal injuries and loss of earnings. The third party obtained a judgment for £1,131 against the insured in respect of the damage to the house. The insured now claimed that the delay until November 29, 1967 was unreasonable and that the insurers had lost their right to repudiate liability on the policy.
Held, that the insurers had not lost the right to repudiate, for the insured had not been prejudiced nor was the delay of such a length as to be evidence that they had accepted liability.
(b) Waiver of future performance of condition
Where the insurers seek to avoid the policy or to resist liability on the ground that the assured has failed to comply with a condition of the policy, the assured will, nevertheless, be entitled to recover, if he is able to show that he has previously been dispensed by the insurers from the obligation of performing the condition in question, and that, in the circumstances, no breach of it has, therefore, been committed.
For the purpose he must prove that he was, in fact, dispensed by the insurers from performance, or that the insurers are stopped from asserting that the condition continues to be in force. The waiver or estoppels must relate to the particular policy or claim.
Where the policy contains a condition relating to waiver, an express waiver of fulfillment should be in accordance with the terms, Any such condition may, however, be waived by conduct.
Even where there is no express waiver, there may be a waiver by conduct where the insurers have rendered the fulfillment of the condition impossible, e g where, in an insurance upon a horse, a condition required the death of the horse to be duly certified by a qualified veterinary surgeon destroyed the horse so that it could not be subsequently examined on behalf of the assured.
The conduct of the insurers may render the fulfillment of the condition unnecessary, e g by wrongfully repudiating the policy or their liability thereunder before it becomes necessary for the assured to perform it, or by refusing to fulfil their part of the condition or by otherwise preventing him from performing it.
Further, the conduct of the insurers may lead the assured reasonably to believe that they do ot insist on the condition being fulfilled.
Thus, the issue of a policy under seal containing a recital that the premium has been paid is a waiver of a condition in the cover note that no liability is to arise until the premium is paid. Similarly, the rewnewal of a policy is a waiver of any condition which, to the knowledge of the insurers, cannot be or has not been fulfilled. In the absence of knowledge, the renewal is not a waiver.
On the other hand, the fact that the insurers have admitted liability under previous policies without relying on a particular exception, does not preclude them from relying on the exception in the case of a subsequent policy; and it is immaterial that the application of the exception could equally have been raised on the facts of the previous cases.
(c) Waiver must be pleaded
To put forward a plea of waiver, whether before or after breach, of a condition precedent to the right of action contained in a policy is a very serious step. It is quite obvious that it is essential in the interests of justice that the insurance company in such circumstances should have its attention called beforehand to the fact that it is intended to rely on an issue of the kind upon which evidence can be called.
Where the assured failed failed to plead waiver, and no application was made at the trial for leave to introduce such a plea, it was held that the Judge was wrong in considering the issue at all.
(2) Waiver by agent of insurers
Where the insurers, as is usually the case, are represented in their dealings with the assured by an agent, a waiver on the part of their agent, whether of performance or of breach, may be binding on them so as to preclude them from relying on the assured’s failure to perform a condition.
To constitute a waiver binding on the insurers, it must be shown that:
a. That act done by the agent must be an act which would amount to a waiver if done by the insurers themselves.
b. The act must fall within the authority which the agent, in fact, possesses, or which he is held out by the insurers as possessing.
Thus, where an agent has authority to receive and give receipts for the premium on behalf of the insurers, his acceptance of a premium with knowledge of a breach of condition is a waiver of the breach binding upon the insurers.
There is however, no waiver where the act done falls outside the agent’s authority. Thus, an agent whose authority is limited to receiving premiums during, the days of grace, cannot waive the non-payment by receiving the premium afterwards and thus revive a lapsed policy.
Similarly, a loss adjuster who is employed by the insurers to adjust the loss, cannot bind the insurers by waiving a condition as to proofs of loss. Again, a local agent has no usual authority to waive a condition concerning the giving of notice of loss to the head office of the insurance company within a specified time.
In some cases the policy may contain a condition expressly prohibiting or limiting waiver by an agent or prescribing the mode in which a waiver is to be made.
5 Statement by BLA and Lloyd’s
In 1977 The British Insurance Association and Lloyd’s drew up a statement of non-life insurance practice which they recommended to their members. The statement applies only to non-life policyholders domiciled in the United Kingdom and insured in their private capacity only, and so far as a breach of a condition is concerned provided:
‘Except where fraud, deception or negligence is involved, an insurer will not unreasonably repudiate liability to indemnify a policyholder…(ii) on the grounds of a breach of warranty or condition where the circumstances of the loss are unconnected with the breach.
[This] paragraph does not apply to marine and aviation policies.’