Policy conditions - The interpretation of conditions precedent

(Cornhill Insurance plc v D E Stamp Felt Roofing Contractors Ltd [2002] EWCA Civ 395)

In the light of the Court of Appeal’s analysis of policy conditions in Alfred McAlpine v BAI (Run-off) [2000] Lloyd’s Rep IR 352 it is apparent that a condition which is not expressed as a condition precedent is likely to be virtually worthless to an insurer. The condition will generally be construed as innominate, which means that its breach will give the insurer the right to refuse to pay a claim or to treat the policy as repudiated only if he has suffered serious prejudice. Breach of a condition precedent, by contrast, is fatal to the assured’s claim whether or not the insurer has suffered prejudice. The absolute nature of conditions precedent explains the judicial suspicion of them, as is illustrated by the Court of Appeal’s decision in Cornhill Insurance plc v D E Stamp Felt Roofing Contractors Ltd [2002] EWCA Civ 395, forthcoming in [2002] Lloyd’s Rep IR.