A. THE COMMENCEMENT OF THE POLICY
The date at which the policy comes into force depends on the intention of the parties as shown by the language of the policy or by the circumstances of the case.
Where the policy expressly provides that the period of insurance is to run from a specified day to a specified day, the first day is excluded, while the second is included. Where, however, the period is stated to run from one day to the other both inclusive, both days are included in the period.
The policy prima facie comes into force as soon as it is issued. The period of insurance thereupon begins and the insurers become liable, irrespective of whether the premium is paid or not.
The policy, however, may provide that it is not to come into force until a specified condition, such as, e g the payment of the premium, has been fulfilled. In this case, though the period of insurance runs from the date of issue, the liability of the insurers does not attach until the condition
has been fulfilled.
Where the policy is ante-dated, the period of insurance runs from the specified date and the insurers are liable although the loss may have taken place before the date of issue.
An ante-dated policy is issued where the policy is intended to replace a pre-existing contract such as the cover note. In case of variance between the cover note and the policy, the assured may be able to enforce the cover note, though unable to recover on the policy. An ante-dated policy is also issued where it is intended to be retrospective.
B. THE DURATION OF THE POLICY
The policy remains in force, in the ordinary course of events, until the expiration of the period of insurance. Usually, the policy fixes the precise hour at which it is to expires; otherwise it expires at midnight of the last day specified.
The policy may, however, cease to be in force at an earlier date by reason of one or other of the following causes:
1 By payment of the full sum insured under the policy.
2 By consent of the parties.
3 Under statute.
4 By breach of condition.
1. Determination by payment
Since the liability of the insurers under the policy is to pay the sum insured and no more, payment of the full sum insured discharges them from any further liability, and the policy thereupon ceases to have effect. It is normally immaterial whether the policy is exhausted by a single loss or by successive losses. The policy may, however, be intended to cover all losses, however many and however large the amounts payable in respect of them, during the period of insurance.
2. Determination by consent
The parties may, at any time during the period of insurance, agree to cancel the policy, either for the purpose of putting an end to the contract between them or for the purpose of substituting another policy in different terms.
The agreement for cancellation must, however, be clearly shown. There is no effective cancellation where the parties acted under the mistaken belief that the policy was void, or where the cancellation was agreed to on behalf of the assured by an agent who, in doing so, exceeded his authority. On the other hand, a misunderstanding as to the precise terms of cancellation does not prevent the cancellation, if otherwise clear, from being effective.
The policy may contain an express condition enabling the insurers or the assured to determine the policy before the expiration of the period of insurance.
Thus, the insurers may reserve the right to determine the policy at any time, on giving notice to the assured and refunding a rateable proportion of any premium paid. The right may be limited to the circumstances specified in the condition, e g where a condition requiring notice to be given to the insurers of any increase of risk or of the cesser of other insurances, empowers the insurers, on receiving the notice, to determine the policy. The language in which the condition is framed may, however, be wide enough to cover any and every cause which could reasonably induce the insurers to desire the termination of the policy, and the effect of the condition, when so framed, is to give them the option of determining the policy at will.
In either case, the policy does not cease to be in force until the insurers have complied with the requirements of the condition by giving notice to the assured and, if the policy so provides, by refunding the balance of the premium paid.
Another type of condition provides that the assured may be entitled, on giving notice to the insurers, to surrender the policy before the expiration of the surrender value, if any, of the policy.
In this case, the policy ceases to be in force as soon as the insurers have received the notice of surrender from the assured. In the event, therefore, of a subsequent loss, the assured is not entitled to recover the amount payable under the policy, but only the balance of premium and any surrender value that may be payable under the condition. It is immaterial that at the time of the loss the policy has not been formally cancelled or the premium refunded or the surrender value paid.
3. Determination by assured
An insured under an ordinary long-term insurance policy has the right to cancel it if he does so within a specified time.
4. Determination under statute
If the insurers, being a company, go into liquidation, the contract of insurance contained in the policy issued by them comes to an end. The assured thereupon ceases to be protected by the policy, and acquires a right to prove against the insurers for the value of the policy on the footing of a contingent claim at the date of the liquidation.
In the case of an insurance company to which Part II of the Insurance Companies Act 1982 applies the amount of any liability of the company must be determined by the valuation regulations made under the Act.
5. Determination by breach of condition
It is not the breach of every condition that affects the duration of the policy. Where the condition broken is a condition precedent of the policy, the effect of the breach, if the insurers elect to take advantage of it, is to avoid the policy abinitio. The period of insurance never begins to run, and no claim can be made under the policy, even though the loss may have taken place before the insurers have elected to avoid the policy. Hence, it is immaterial that the actual avoidance takes place under an express condition of the policy.
Where the condition broken is a condition precedent to the liability of the insurers, the only effect of the breach is to preclude the assured from enforcing any claim in respect to which there has been breach of condition. The period of insurance continues to run and the policy remains in force. If, therefore, a subsequent loss takes place, the assured is not precluded from enforcing his claim in respect of such loss by reason of his previous breach of condition, provided that, in this case, the condition is duly performed. Where, however, the condition broken is a condition subsequent of the policy, the effect of the breach, if the insurers elect to take advantage of it, is to determine the period of insurance and to avoid the policy. The avoidance in this case dates only from the breach. Until the breach the policy ia a valid and subsisting contract of insurance, and, although the assured cannot enforce a claim arising after the breach, seeing that the policy has ceased to be in force, he is not precluded from enforcing a claim which has already arisen.
The principal conditions subsequent in use relate to the following matters:
1 The alteration of the risk under the policy.
2 The assignment of the subject-matter insured under the policy.
3 ‘Other insurance.’