Conditions Precedent in Insurance Policies

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Conditions precedent are contractual terms often found in insurance contracts. It is important to distinguish conditions precedent from bare conditions (also known as conditions subsequent) as the consequences following breach of each are different. A breach of a condition precedent in an insurance contract may allow insurers to avoid paying out under a claim regardless of whether they have suffered any prejudice as a result of the breach. Alternatively it may mean that cover never attaches in the first place so that the insurer is never in risk.

Given the consequences which follow from a breach of condition precedent it is important to phrase terms as bare conditions wherever possible. Policyholders should consult with their insurance broker to ensure that conditions precedent are kept to a minimum in their policies. If conditions precedent are necessary, policyholders should consult their brokers to ensure that they are aware which terms are likely to be classified as such. They should then seek to ensure that their businesses are in compliance.

This guide is designed to complement the technical guide produced by Airmic in 2013 with the assistance of Herbert Smith Freehills LLP relating to warranties in insurance policies. Read together, these guides provide a practical overview of different terms in insurance policies.

This guide has been produced with the assistance of Herbert Smith Freehills LLP as a preferred service provider to Airmic. The content of this guide relates to the position at English law and does not constitute legal advice. Members are advised to consult their lawyers should they require advice on any matter which forms the subject of this guide.