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Insurance Isn’t Just A Tick Box Exercise

How many of us read the small print in insurance quotes? A recent case, Bluebon Ltd v Ageas (UK) Ltd and others [2017], shows the perils of not reading the detail.

The owners of a hotel were suing an insurance company for not paying out after a catastrophic fire in 2010. The insurance company refused to pay, and were successful in defending the claim to pay, because the insurance contract required the owners of the hotel to promise (or warrant, in legal terminology) that the electrical installations would be tested every 5 years.

The hotels owners had attempted to argue that the requirement was for an electrical test within 5 years of the start of the policy. The electrics had last been tested in 2003.
The court decided that the insurance policy had been suspended for the entire time that the hotel owners had been in breach of the promise/warranty as, the only commercial understanding of the requirement for a test every 5 years was that the 5 year period ran from the date of the last test and not the date the insurance policy commenced.
Insurance law has changed since the facts of this case, as the Insurance Act 2015 is now in place. However it is likely that the hotel owners would still have lost their claim as the Insurance Act means that an insurance company cannot refuse to pay out where a term has not been complied with unless the insured can show that the non-compliance could not possibly have increased the risk which the insurance company is protecting against.
The case is a useful reminder of the importance of checking what you are signing up to rather than just paying the premium and forgetting about the policy until next year.

If you need any advice call our Commercial Property team on 0800 088 6004