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We all like to save money. Most of us like to think we are pretty savvy when it comes to shopping around for the best deal – be it that shiny new car, latest piece of technology, or the latest clothing fashion.
However, many of us do not make that purchase on the basis of price alone. We will test drive the car, check its specification, calculate the finance, and perhaps even purchase an extended warranty. This is good due diligence.
By comparison, however, the majority of us do not apply the same high standards when arranging our Insurance. Many purchase their insurance on a ‘grudge’ basis. Perhaps that’s because it’s an intangible product, or we think “it will never happen to me.” But what if it does happen to you?
Will you be properly insured or covered at all?
At Castlemead, when we visit prospective Aviation clients to complete an audit of their insurances, we are continually amazed at how lax an attitude people have towards the warranties and conditions attaching to their policies.
Many do not realise the implications of non-compliance, and yet this is one of the first areas an insurer will investigate following a claim.
Just because you paid your premium and have a policy in your hand, it does not guarantee that your insurer will settle.
It will then be too late to start reading those warranties and conditions and even worse to discover that you are in breach!
Most of us joke about the ‘small print’, but when it comes to insurance the idiom is never more apt ‘the devil is in the detail’.
So, what does some of this detail mean?
According to Wikipedia “a warranty generally means a guarantee or promise which provides assurance by one party to the other party that specific facts or conditions are true or will happen.”
A few examples will best illustrate:
If your property has any proportion of a flat roof then it is probable that a Flat Roof Warranty will apply and the wording will be something along the following: “All flat roofs are inspected at least annually by a qualified person and all defects found remedied immediately.”
Most business policies will have a Waste Warranty attaching, which will state something like: “all combustible trade refuse shall be removed from the Buildings at the end of each working day. All waste or refuse outside the Buildings is stored in non-combustible lidded containers or metal skips kept at least 5 metres from any building or other property and removed from the premises when full.”
Another common warranty is the Unoccupancy Warranty which will restrict the cover on a property after it has been unoccupied for a certain period of time and will require some services to be turned off and regular inspection visits.
Non-compliance constitutes a breach, and the policy can be repudiated ab initio (from the beginning).
There are many other warranties for various types of risks. It is essential that you check your policy and make sure that you understand your warranties and conditions and the potential outcome for non-compliance.
In summary, we would do well to heed the Marine Insurance Act 1906, which bluntly states that a warranty “must be exactly complied with, whether it be material to the risk or not”.
And to quote the Law Commission in their 2012 review, “Once a warranty has been broken, the policyholder cannot use the defence that the breach has been remedied. Furthermore, the breach discharges the insurer from all liability under the contract, not just liability for the type of risk in question. Thus a failure to check a fire alarm would discharge the insurer from paying a claim for flood damage.”
However, they went on to note that such an approach is outdated and they have proposed “that a breach of warranty would suspend the insurer’s liability, rather than discharge it. Where the breach is remedied before the loss, the insurer must pay the claim. Furthermore, where a term was designed to reduce the risk of a particular type of loss, a breach would suspend liability in respect only of that type of loss. For example, a failure to install mortice locks would not affect a claim for storm damage.”
The end result of this review is that The Insurance Act 2015 received Royal Assent on the 12th February 2015, and will come into force in August 2016. It will incorporate the proposed amendment above.
In the meantime however……….do not ignore your warranties!
If you would like a free audit of your insurance arrangements and, documented by way of a forensic report or if you have any questions arising from any of the issues raised in this article please do not hesitate to contact Adrian on 07795 053738.
Adrian Webb Cert CII
Adrian has thirty years Insurance broking experience having managed his own business for twenty one years until it was purchased by a national brokerage. Adrian continued to run the business for its new owners prior to joining Castlemead where he has been tasked to develop a new office at Exeter as part of Castlemead’s continued growth strategy.
Castlemead are the official appointed Insurance broker for WEAF having extensive experience serving aviation clients throughout the South West and nationally. If you are involved at any level in the supply chain please contact us on 07795 053738 for assistance.