Insurance Terms: The Importance of a Condition Precedent

Your insurance policy documentation is full of many different types of terms and conditions.  Bluestone Commercial Account Executive Dominic Curnock explains the the importance of a Condition Precedent.

Many businesses correctly protect themselves with insurance cover however, this valuable cover can be compromised if a full understanding of the insurers’ requirements are not met. This is a contract where both parties have a part to play.


Do you realise the POWER a condition precedent can have?


“under a condition precedent to liability, the insurer will not pay anything (i.e. has no liability) once the specific condition precedent is not complied with. Care needs to be taken if this refers to a condition precedent under the contract (i.e. policy) as all claims could be avoided, or if a term is added to make all conditions ‘conditions precedent’. Other conditions precedent only apply to claims specific to the subject matter, such as theft claims for security requirements. Basically, the condition will tell you what will happen – if it doesn’t it cannot be relied on by the insurer”.


An example of a typical condition precedent :- “It is a condition precedent to the liability of the Insurers under this Policy that in respect of all bona fide subcontractors engaged by or on behalf of the Insured, written evidence shall be obtained prior to work commencing that such subcontractors hold a valid Public liability policy for an indemnity limit of not less than £5,000,000”

Therefore in this situation, if you are unable to evidence that you have confirmation that a sub-contractor holds this insurance then the insurer can avoid any liability for the loss. If there is something within your insurance policy that you require clarification on, always ask your broker about this as they will be happy to help you understand your insurance contract so you can avoid falling foul of such issues.