Breach of condition - Effects of a condition precedent

(George Hunt Cranes Ltd v Scottish Boiler and General Insurance Co Ltd [2001] EWCA Civ 1964)

There is a clear distinction in English law between the consequences of a breach of a condition precedent to the liability of the insurers and breach of an ordinary condition. In the case of a condition precedent, the insurers are simply not liable to meet the assured’s claim, as the assured has failed to carry out the steps required of him to establish the insurers’ liability. In the case of an ordinary condition, the general approach of the courts is to classify the condition as innominate, so that the rights of the insurers depend upon the seriousness of the assured’s breach and the seriousness of the consequences of the breach for the insurers. If the breach is trivial, the insurers have to make payment subject only to the right to recover damages from the assured for any loss suffered by them: only in highly exceptional cases will there be any loss to the insurers. If, by contrast, the breach is serious then the insurers may have the right to treat the claim as having been repudiated (allowing them to refuse to pay) and, in some cases, to treat the policy itself as having been repudiated (allowing them to terminate the policy). The possibility of repudiation of the claim was first mooted in England in Alfred McAlpine plc v BAI (Run-Off) Ltd [2001] 1 Lloyd’s Rep 437 , although the relationship with the concept of repudiation of the policy is as yet unclear. What is obvious, however, is that the crucial distinction is between condition precedent and bare condition. The correct approach to that distinction was discussed by the Court of Appeal in George Hunt Cranes Ltd v Scottish Boiler and General Insurance Co Ltd [2001] EWCA Civ 1964, to be reported in [2002] Lloyd’s Rep IR.