Summary assessment not allowed where the nature of the insurance terms meant they would need to be determined at trial

AC Ward & Sons Ltd v Catlin (Five) Ltd & Others (2009) CA (unreported)

The appellant insurers (C) appealed against a decision that they were not entitled to summary judgment in a case where their insured (AW) had made a claim for lost property following a theft from their warehouse. C had refused to pay the claim on a variety of grounds including breach of two warranties which required:

• a stated burglar alarm was installed and effective when the premises were closed
• a protection and maintenance warranty which required that all security measures were maintained in good order and defects promptly remedied

The warehouse was protected by a vibration detector. Whilst the burglars had disturbed the detector, the alarm was not activated. CCTV that was in operation also failed to be transmitted to the monitoring station, which would have also raised the alarm in ordinary circumstances. C declined cover for the claim on the basis that the warranties had the effect that insurers were not on risk during the time the warranties were not complied with. When proceedings were issued, C applied for summary judgment on those grounds. The application failed on the basis the terms were not suspensive conditions as C had argued, but warranties as defi ned in the policy. Further, the judge held that AW had an arguable case which they were entitled to seek a determination for at trial. C appealed on the basis that the breach of the warranties meant that AW had no prospects of success. However, the Court of Appeal held that the wording was such that unless an approved alarm and protective measures were installed which were in full working order when the premises were closed, the entire policy would be discharged automatically. Whilst the court considered this to be a draconian interpretation, it held that the more draconian or unreasonable the effects of breach of the policy would be, the more clear and specifi c those terms needed to be. It was clear that the court considered those terms to be unreasonable and/or draconian and as a result the appeal was dismissed, as AW was entitled to have the construction of those terms and the facts of the case considered and determined at trial.

This case represents a further indication that where breach of policy terms may lead to a signifi cant outcome for the policyholder, the court will expect such terms to be clear and precise to avoid any uncertainty or ambiguity on the requirements of, and the impact of those terms on the policyholder. Simply seeking to rely on breach of those terms as forming the basis of the declinature of the alone is unlikely to be suffi cient unless those terms are specifi c, clear and precise.