Insurance by its very nature exists as a risk distribution platform requiring the insurer to utilize the pool premium placed in the form of liquid reserves available to compensate claims raised the insured. While most individuals remain convinced along that belief of recovering their losses from hefty compensations, insurers reveal tougher stances against settling insurance claims. In particular, contrary to the conviction that the insured against burglary will receive a fat cheque as a full compensation for loss suffered in stolen compensation, insurers portray a stricter process as reflected in the case involving Arthur versus Friendly Accident. This implies that purchasing an insurance policy does entitle one to certainty of receiving the payout if even when the insured risk strikes . However, the enforcement of the UK insurance law shields claimants from insurers refusing to pay out claims while offering legal guidance on the interpretation of the contractual terms and obligations for either party.
Arthur Failed to Take Reasonable Care: Policy Conditions
The rights of Arthur in the arguments demonstrated in the case, pegs to the direction offered by English law as guidance to the interpretation of the property insurance policies and the contractual terms between the parties. Initially, it is prudent to invoke the principle of construing to establish what the Friendly Accident intended by the policy condition requiring Arthur to exercise reasonable precautions to avoid loss. Here, the emphasis of the factual and the surrounding circumstances to determine the purpose of the insurance policy is of essence unlike the previous favour assumed by judges through fairly narrow interpretation . In this light, the argument placed by the insurer portrays the illustration of in Charter Re Co. Ltd v. Fagan(1996), where the terms were interpreted as what an ordinary man in the street would derive the meaning.
Although apparent that judges have diverged from the ordinary meaning in regarding certain terms as either harsh or onerous on the rights of the insured, a concise examination of the purpose is fundamental. For this reason, they should equally demonstrate complete examination of the exclusion clauses, especially where the wording attempts to restrict unduly, circumstances when the insurer is liable under the claim. Nevertheless, the rights of Arthur seem to extinguish in the ruling of Starfire Diamond Rings Ltd v. Angel (1962). In this case, the insurer exempted liability for the negligence of the insured by leaving the car unattended. Using the frame of reference set by the court ruling, determination of the rights a party has should deprecate from attempts to expound the clause comprising common words with perfect and clear meaning . Given that Arthur left the alarm to his house as deactivated despite locking his house, it allowed the intruder access to the valuables thus resembling the negligence revealed by Angel in leaving the car unattended. Consequently, the insurer is right not to pay claim placed by Arthur owing to his failure in exercising reasonable care.
Contrary to the aforesaid position, it is prudent to weigh the rights of Arthur in the presentation of the Friendly Accident argument against term and conditions revealed in the modern insurance policies. The priority rests on regarding the reasonable care asserted by the insurer against the claim as either a condition precedent or warranty to the insurance contract. It is vital to note the varied positions under either of the clarification under the UK insurance law. Similar differentiation performed between an exception clause and a condition is necessary as the latter places a duty on the insured while the former restrict the scope of the claim in the insured event . Firstly, though breaching the condition precedent relives Friendly Accident from liability to pay the alleged claim, the insurer is liable to pay subsequent claims in accordance with the term precedent. On the other hand, breaching a warranty relieves the insurer from incurring liability of both settling the claim and additional primary liability entitled by the policy . It is against the second provisions whose reliance reflects the argument by the insurer citing negligence of Arthur to exercise reasonable care.
The examination of reasonable care requires judging the circumstances through a test of objective lens rather than referring the subjective characteristics of the incidence. In view of this, passing an objective test reveals negligence to activate the alarm after locking the door that would otherwise make it difficult for Bert to break in. Equally, Arthur failed to activate the burglar alarm on a subjective conviction no one will break into the house within that short period. He fails to take any precautionary actions waking the dog that would otherwise alert him of an incoming intruder despite leaving alone. Although the Court of Appeal in the Barrett Bros (Taxis) Ltd v. Davies held that the insurer cannot rely on the breach of notification to refuse a claim, the insured right ceases when it causes prejudice to the former . The subjective assumption embraced by Arthur in his actions, prejudice the insurer as locking the door, setting the burglar alarm and waking the dog could have collectively averted the loss. This suggests failure to exercise reasonable care by Arthur, which extinguishes his rights.
Is the Case Policy Subject to a Warranty Requiring the Burglar Alarm to be activated ‘Whenever the House is Unoccupied’
A modern contract of insurance expressly incorporates terms, upon which the insurer derives the obligations upon which the insured party should embrace by the virtue of the insured event. While these terms arise from the declarations stipulated in the proposal, the insured is required to derive implied of them from the provisions of the policy document. Owing to the peculiar history in various insurance contracts, the UK insurance law developed a set of unique principles regarding warranties and conditions. In particular, the insurance law places warranties as fundamental to the binding agreement unlike the spot embraced by such in the general contract. However, the obligations placed by the warranties are subjected to control by the Unfair Terms outlined in the Consumer Contracts regulations (1999) alongside the Consumer Insurance Act (2012).
In the determination of whether requiring activation of the burglar alarm whenever the house was unoccupied constitutes a warranty, invites the scrutiny of the imbalances its breach would cause the parties. At this point, the assessment takes into account the rights of the parties and the nature of services implied by the contract at inclusion. A warranty constitutes a term made or imposed describing that a defined state of affairs should exist to control the risk assumed by the insurer. Equally, it relieves the insurer from incurring liability upon the insured breaching it, whether it contributes to the loss suffered in the insured event. For instance, in the case involving Bank of Nova Scotia v. Hellenic Mutual War Risks Associates Ltd, it was held that breaching the warranty stipulated in the marine policy, automatically relieved the insured from admitting liability . A similar result has been extended to non-marine insurance policies, including consumer and property insurance policies.
The straightforward platform of examining the terms outlined in the contract policy as warranties, involves direct disclosures submitted by the insured to in the operation of the insurance proposal form. However, the insurer cannot rely on this premise as earlier thought by adding a declaration effecting that the submissions in the proposal form are the warranties of the submissions and whose breach, nullifies the insurance contract. This determination was reflected in the Thomson v. Weems and later demonstrated in the Dawsons Ltd v Bonnin case . It was concluded in the aforesaid cases that, though the proposal was meant to form the basis of their contract, such would allow the insurer to convert them into warranties. Nevertheless, not all the statements of a proposal form sufficiently constitute warranties to the insurance contract. This was explained in the Deaves v CML Fire and General Insurance Co Ltd where it was held that the answers in the declaration should qualify as an essential condition of the contract. This would distinguish the right of the insurer to refuse the claims from the automatic bar to admit liability .
Alternatively, terms constitute a warranty when words expressly applied dictate that the contract would be treated as void if the insured does or refrains from performing a specified thing. Although this places the warranty for strict compliance in the contract whose breach allows the insurer to refuse liability, its scope must immediately be clear during its completion. However, promissory warranties raise difficult questions about the intended construction of the contract and such ambiguity is interpreted against the insurer. The court illustrated this in the case of Provincial Insurance Company Ltd v. Morgan, where the response provided by the insured amounted to a promissory warranty. Although it sets a defined reference reflecting the future of the contract, the ruling relied on a reasonable construction that such was not exclusively for the lorry to carry coal only . As equally revealed in the Pratt v. Aigaion Insurance Company (2008), referring to only purposes could have allowed insurers to avoid liability.
Additionally, the insurer may not refuse a claim where the basis of this proposal clause entails qualifying words such as the best of insured knowledge and belief. This arises from the effect that the insured does not warrant in absolute truth, but relies on the basis of the beliefs held at that time. Arthur would succeed against the argument raised by Friendly Accident on proving that the declaration of activating the alarm to avert theft was merely on his belief at that time. However, Arthur ought to have complied with the warranty, whether express or implied. The rights of Arthur in this case rests on the attention of limiting the right of the insurer in refusing the claims, by citing no connection between the breach of the warranty and the loss arising . Since failure to activate the burglar alarm allowed Bert to break the house in ease, the breach of it automatically discharges the insurer from admitting liability for the loss arising from the incident.
Advice against the Argument that Hitting Christopher with a Spade was a Criminal Act and not an Accident
The argument raised by Friendly Accident in denying claims sought by the Arthur traces to the principle of exercising a legal duty of reasonable care to neighbours. This was illustrated in Lords Atkin in the Donoghue v Stevenson (1932), where an individual must embrace care to a foreseeable level; by avoiding or omitting acts likely inflict injury to the neighbours . The rights of Arthur rest on the success of determining the limit of who qualifies as the neighbour. While the answers to the above question is every individual, whether closely or directly injured in my acts, where one ought to have assumed a standard duty to have them in my contention. In view of the above position, Arthur fails contravenes the neighbour principle as his contentions aimed to bar the victim against perpetrating consecutive theft.
The argument to reject the claims raised against personal liability that Arthur will suffer in the award of £20,000 to Christopher for injuries suffered, violates the standard care held by the general rule. It stipulates that where the defendant exercises standard care revealed of a reasonable prudence, objectivity should be placed I the interpretation of the personal liability. The concept of exercising standard care is important to dispel the subjectivity and prejudices that Arthur would suffer in the argument raised by Friends Accident. This traces to the fundamental construction of the personal liability policies embraced by professionals to recover from personal liability on proving innocence in their acts . The intent of Arthur in taking this cover rests on gaining protection from third-party claims from his reasonable actions.
The events leading to trigger the loss in this case demonstrate reasonable attempts to avert a repeat break into the house. Acting on the contention of the previous escape of Bert, Arthur hits Christoper on a mistaken identity of his brother who made away with the valuables worth £10,000. Although attacking the victim and causing personal injury amounts to the criminality alleged by Friendly Accident, Arthur is entitled to claim under the personal liability as his actions reflect the best interests of all parties. Similar to the position held for directors claiming under this policy to demonstrate the best interests of their employer, the allegations of criminality are extinguished by the nature of the circumstances surrounding the event . For instance, the police could not press charges against Arthur as he acts prudently to avoid repeat stealing and reasonably believed taking more time would amount to another escape of the perpetrator.
The success of Arthur rights of recovering the £10000 awarded to Christopher exists on the counterargument that he seeks compensation not on the basis of using liability insurance as an auxiliary device of seeking protection but rather seeking claims for the insured event. The argument raised by Friendly Accident raises an inevitable point where the insurer may assume influence to limit claims and how liability is satisfied . Consequently, the act of hitting Christopher is not based his negligence or contentions to commit a crime, but rather liability suffered in exercising reasonable protection of his property.
While hitting Christopher with a spade violates his right of non-interference with his body that causes infliction of injury, Arthur is liable for battery as he commits it without consent of the former. However, the intention of Arthur rests on reasonable protection of his house against an intruder, rather than committing a crime. For this reason, Friendly Accident is liable to compensate Arthur personal liability to the extent of damages awarded to Christopher.
- Birds, Joh. Insurance Law in the United Kingdom. Alphen aan den Rijn: Kluwer Law International, 2010.
- Brook, Nigel. Insurance & Reinsurance: Jurisdictional Comparisons. 1. London: Thomson Reuters, 2012.
- Gammell, Kara. “Insurers’ 10 Favourite Reasons Not to Pay.” 22 April 2010. 15 August 2014 .
- Gillies, Peter and Niloufer Selvadurai. Marketing law. Sydney : Federation Clause, 2008.
- Hodges, Susan. Cases & Materials on Marine Insurance Law. Oxon: Routledge, 2012.
- Mallon, Christopher and Shai Y Waisman. The Law and Practice of Restructuring in the UK and US. Oxford : Oxford University Press, 2011.
- Merkin, Bob and Jenny Steele. Insurance and the Law of Obligations. 2013. Oxford: Oxford University Press, 2013.
- Merkin, Robert. Insurance Law: An Introduction of Practical Insurance Guide. New York: CRC Press , 2014.
- Reuvid, Jonathan. Managing Business Risk: A Practical Guide to Protecting Your Business. 2. London: Kogan Page, 2005.
- Steele, Jenny. Tort Law: Text, Cases, and Materials. Oxford: Oxford University Press, 2010.
- Tarr, Julie-Ann. Disclosure and Concealment in Consumer Insurance . Oxon: Routledge, 2013.