Judge Interprets Potentially Conflicting Conditions Precedent And The Meaning Of 'Left Unattended'

A fire at the insured's premises destroyed the vast majority of its stock. The evidence suggested that the fire was started by an intruder. Although a fire alarm at the premises detected the fire, the insured's burglar alarm had not been set at the time and in fact was no longer being monitored by the provider, SECOM, because its monitoring charge had not been paid by the insured. At the time of the fire, which happened at 01.00 am on a Saturday, the owner of the insured had been asleep in a separate dwelling area on the premises.

The insured's property insurer repudiated liability on the basis that there had been a breach of two conditions precedent. The policy contained:

1. a condition precedent (GC7) which provided that "the whole of the protections including any Burglar Alarm provided for the safety of the premises shall be in use at all times out of business hours or when the Insured's premises are left unattended and such protections shall not be withdrawn or varied to the detriment of the interests of Underwriters without their prior consent"; and

2. a further clause (PW1) which provided that "It is a condition precedent to the liability of the Underwriters in respect of loss or damage caused by Theft and/ or attempted Theft that the Burglar Alarm shall have been put into full and proper operation whenever the premises...are left unattended..." (emphasis added).

The case therefore turned on the inter-relationship between GC7 and PW1 (it being accepted, in accordance with English law principles that, since they were both conditions precedent, a breach did not have to be shown to have caused the loss). Jay J held as follows:

1) Wording in a quotation sheet which indicated that PW1 was intended to override GC7 did not form any part of the contract of insurance.

2) The correct approach to construction of GC7 is to examine its commercial purpose in light of the other relevant contractual provisions. The judge rejected the approach of some American courts that "each clause must be seen as an island unto itself". Here, it could not be said that the sole purpose of the burglar alarm was to reduce the risk of theft (and hence a burglar alarm differs from a fire alarm). A burglar alarm protects against the risk of intrusion which might in turn lead to damage to property. Accordingly, it could not be said that PW1 entirely predominated over GC7. Furthermore, the burglar alarm had a "domain of activity" outside of theft and so PW1 was not...