In understanding ‘Policy Conditions’ it is first important that you carefully read all insurance documents provided to you before cover commences. All insurance products contain policy conditions, often referred to as General Conditions and/or Conditions Precedent to the Liability of Insurers, with which you must comply for cover to operate.
Policy Conditions are often over-looked by policyholders when reading their Policy Document or Schedule; however, these conditions grant considerable power to the Insurer in limiting their exposure to risks that could have otherwise been mitigated or avoided through compliance with said conditions, and the Insurers’ Claims departments are skilled in understanding and applying these conditions rigorously.
It should also be noted that, by their own admission, most policyholders do not read their policy documents until a incident occurs. Many claims each year are declined due to a breach of one or more of the policy conditions, and the Financial Ombudsman Service (FOS) deal with the subsequent complaints. However, the FOS tend to side with the Insurer in such cases, unless there has been some exceptional failure to communicate specific or erroneous conditions to the policyholder in a clear and explicit form (such as, but not limited to, a ‘Deep Fat Frying condition’ within a bespoke Restaurant or Takeaway policy, or a ‘Thatched Roof condition’ of a policy specifically designed for Thatched homes etc).
Many policy conditions are contained within the Policy Wording document as standard, whilst others are added to the policy schedule (often referred to as “Endorsements”) once the risk details have been fully considered by a prudent underwriter, or applied automatically in recognition of some universally accepted aspects of certain trades, industries or professions.
As such, failure to meet the terms of a General Condition or Condition Precedent, at any time during the policy period, could give underwriters the right to void the policy in its entirety (and keep the premium paid, if they can prove intent to commit fraud), reduce the value of your claim (if the insurer feels that the breach increased the value of the loss, but would not have otherwise prevented the loss occurring), or suspend a claim until the breach is remedied (and an additional premium is paid, if required by the Insurer), depending on the severity and relevance of the breach. This latter part is probably the most important change to recent insurance law, as Insurers can no longer refuse a claim due a breach of policy conditions where the breach had no bearing on the claim (for example, a claim for Theft can no longer be refused due to a breach in the Electrical Inspection condition, but can still be refused if there is any breach in the Minimum Security condition).
If a Condition is difficult to understand, or to see how it may work in practice, you should seek clarification from your broker (or the Insurer, if cover has been arranged directly) before accepting a quotation or renewal invitation. There will not be an opportunity to clarify the practical application or intent of a condition in the event of an insured incident occurring and a claim being reduced, refused or rejected.