2. Policy Conditions and Warranties

Question 1

What is meant by a condition?

Answer 1

A contract condition is a contractual term that requires one of the contracting parties to do or not do something

Question 2

What are the types of conditions?

Answer 2

1. Implied Conditions
2. Expressed Conditions
3. Conditions Precedent
4. Conditions Subsequent

Question 3

What is an expressed condition?

Answer 3

Those stated in the contract, simply means they are expressed

Question 4

What is an implied condition?

Answer 4

• Simply implied. Not stated in contract. Common sense.
• Sometimes there are contractual terms that are implied by law, e.g The Supply of Goods (Implied Terms) Act 1973.

Question 5

What is the Conditions Precedent to liability condition?

Answer 5

If breached, means there is no liability on Insurers to meet the claim.
- EG - if premiums not paid, Insurer not liable to pay claim.

Question 6

What is the Conditions Subsequent condition?

Answer 6

These conditions apply after a loss has occurred.
- EG - Policyholder refusing to cooperate with any attempt to recover the money from person causing damage would be a breach of this condition.

Question 7

What are some examples of Policy Conditions that are found on most if not ALL policies?

Answer 7

1. Reasonable Care Condition
2. Insurer’s rights following a claim
3. Subrogation
4. Arbitration

Question 8

What is the reasonable care condition?

Answer 8

• Condition requires PH to exercise reasonable care to prevent losses.
• Common way to describe obligation is for PH to behave as though they are not insured
• FOS guidelines is to judge whether PH has been reckless

Question 9

What are Insurer’s rights after a claim?

Answer 9

• Insurer requires the rights to carry out investigations to establish that loss is covered under policy.
• Condition usually states that PH must provide reasonable proof and allow Insurer’s to appoint persons to carry out reasonable investigations
• Should PH refuse, Insurer can refuse claim on the basis they haven’t upheld condition.

Question 10

What is a Warranty?

Answer 10

• Relates to something is ongoing
• EG - Warranty that requires the PH locks the external doors at COB.
• Breach of warranty can make the policy void from date of breach

Question 11

What happens when there is a breach of warranty?

Answer 11

• Customers are to be treated fairly
• FCA states that an Insurer should not reject a claim due to a breach of warranty or condition that is unrelated to the claim.

Question 12

What are signs of retail customers being treated fairly?

Answer 12

1. Decision making at all levels reflects fair treatment of customers.
2. Firm uses staff, customer & other external feedback where appropriate with timely action
3. Interests of customers are properly balanced against those of shareholders (& other customer groups).

Question 13

What are signs of retail customers not being treated fairly?

Answer 13

1. Minimal evidence that decisions reflect any consideration of the impact on customers.
2. Firm is slow or unwilling to react to customer/staff feedback
3. Conflicts between interests of shareholders are consistently and inappropriately resolved in favour of shareholders.