By George Coucounis
Every insured person normally has a double obligation towards the insurer, a duty to disclose all the relevant information at the time the insurance policy is made for the insurer to know the extent of the risk he undertakes and a duty to inform him immediately after the incident occurs and submit a true claim for damages. The insurer in order to protect his rights before and after the insurance policy is made includes certain conditions in the policy which are of the essence of the agreement and any breech of them causes the policy to be void and gives the insurer the right to cancel it. An insurance policy like every other agreement contains certain terms which are considered essential and due to their nature, they are called conditions precedent. Any breech of them by the insured gives the right to the insurer to cancel the insurance policy and refuse to indemnify him. Such conditions may impose an obligation upon the insured not to mislead the insurer about the risk or to inform him immediately after the incident occurs. There are also other terms which are simple and are called warranties, giving the right for damages only, such as the obligation to provide the insurer with details and proof of the claim.
The above issue was examined recently by the Supreme Court in a case whereby an insurer refused to indemnify his client who had insured the contents and equipment of his business for fire. The incident occurred and despite the fact that the insured submitted certain proof about the damage he suffered, the insurer requested him to submit more details and proof. The insurer finally refused to indemnify his client based on a relevant term of the policy which released him from the obligation to pay having not received all the required proof by the insured. In the action instituted by the insured, the Court of first instance considered his omission as a breach of a condition precedent and dismissed his claim, with cost. The Supreme Court did not share the same view and accepted the appeal ordering the re-trial of the action. It decided that the relevant term in the policy was not a condition precedent affecting the validity of the agreement but it was a term relevant to the examination of the claim of the insured. Breach of such term cannot have the same consequences with a condition precedent which releases the insurer from liability and gives him the right to cancel the agreement.
The relevant term in the policy making the insured liable to provide the insurer with details about the damage constitutes a warranty, suspending the obligation of the insurer to indemnify until there is compliance with this obligation. The relevant term is under the heading of “Compliance with terms of Claim” and simply releases the insurer from liability to pay. Furthermore, it does not state any time for compliance and therefore, it should have been examined whether the time set or agreed was essential or not. Moreover, the fact that an extension of time was given without the insured having complied, it did not automatically give the right to the insurer to be released from the obligation to pay without him previously making the time of the essence of the policy. Additionally, the intention of the insured to comply was not in fact examined, since the insured actually intended to do so but faced certain difficulties in collecting the details requested. This was an essential issue which should have been decided before the Court to have concluded whether the decision of the insurer not to pay was legal and reasonable.
The Supreme Court held that it is usually upon the Court to decide whether a breach of such term causes so serious consequences that justify the insurer to cancel the whole policy and refuse to indemnify the insured. It follows from the above that any person insured should act quickly and properly in his relation with his insurer so that in case of an incident to submit the proof required in order to be indemnified.
George Coucounis is a lawyer, Leading Partner in George Coucounis LLC based in Larnaca - Cyprus
www.coucounislaw.com - E-mail: firstname.lastname@example.org - Tel: +357-24818288.