Some feedback on a Warranties and Conditions case from Kennedys;
In a landmark ruling the Court of Appeal has overturned the decision of the lower court in the Scotbeef case in favour of the defendants.
This is one of the first decisions in which the interpretation of the Insurance Act 2015 to conditions precedent and warranties has been considered and is the only case to have gone to the Court of Appeal on these points.
As Chris Chatfield partner at Kennedys who represented the Scotbeef insurers Lonhams in the action explains:
“In Scotbeef the Court of Appeal handed down one of the first reported decisions on the Insurance Act 2015. It is an accolade to the drafting of that legislation that so little reported litigation has occurred. However, the decision in Scotbeef highlights some of the difficulties in distinguishing between conditions precedent, warranties and pre-contractual representations.
“The case is significant given the lack of judicial comment to date on the interpretation of the 2015 Act. The decision provides useful guidance on the approach of the Courts to the use of conditions precedent.
“The Court of Appeal recognised the obvious need for insurers to be able to assess their liability (so that they can properly consider and rate a risk) by requiring an insured to trade subject to certain terms. In the logistics and warehousing industry, such contract terms are widespread and essential for controlling liability where the value of goods stored or carried is usually unknown and may be considerable. Insurers rely heavily on policy terms which require their insureds to incorporate contracts which limit liability and impose time bars on claims.
“Nevertheless, insurers should also take note of the decision insofar as it acts as a warning to all insurers to ensure that, if they wish to rely on warranties or conditions precedent to control their potential liability, such terms must be drafted so as to avoid falling into the trap of converting representations into warranties.”
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