High Court Rules On Application Of Conditions Precedent In Insurance Policy

The case of Milton Furniture Ltd v Brit Insurance Ltd [2014] EWHC 965 (QB) concerned losses suffered by the claimant (Milton) arising out of a fire at its premises in 2005. Milton sought indemnity for these losses under a policy underwritten by the defendant (Brit). Brit denied cover on the basis of breaches of two conditions precedent in the policy.

The policy contained two conditions relevant to the present case. First, it contained a protection warranty entitled "PW1 - Alarm Warranty" which stated that it was a condition precedent to any liability in respect of loss or damage caused by theft that the burglar alarm should be in operation and properly maintained (PW1). Second, it contained, as general condition 7, a clause to the effect that the burglar alarm should be in use at all times outside of business hours or when the premises were left unattended and should not be withdrawn or varied to Brit's detriment without their prior consent (GC7). GC7 was not stated in terms to be a condition precedent.

It was common ground that the burglar alarm was not set on the night of the fire, but it was also common ground that certain employees of Milton were present in parts of the premises used as living quarters overnight. Mr Justice Jay found that, on the evidence, Milton had failed to pay monitoring charges to the company which provided the alarm services. It was also held by Jay J that the fire had been caused by arson and by someone with inside knowledge of the premises.

On the basis of those facts, there were a number of issues to be determined: (i) was GC7 subordinate to PW1, such that it was not to be considered a condition precedent to liability; (ii) did PW1 qualify GC7 such that the duties in relation to the burglar alarm were the same under both provisions; (iii) was Milton in breach of GC7 by not ensuring the burglar alarm was in use at the material time; (iv) was Milton in breach of GC7 by permitting the withdrawal of the burglar alarm; and (v) if GC7 was not a condition precedent, was any breach of that clause causative of the loss sustained?

Jay J reached the following...