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should be in use at all times outside of business hours or when the premises were left unattended and should not be withdrawn or varied to Brit’s detriment without their prior consent (GC7).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 conclusions in relation to each of the issues:

  1. GC7 was not subordinate to PW1 - the commercial purpose of the contract made it plain that GC7 was intended to be a condition precedent to liability;
  2. GC7 was, however, to be “read down” so that Milton’s duties under GC7 should be no more onerous than those under PW1;
  3. Milton was not in breach of the first limb of GC7, as although the burglar alarm was not in use at the material time, the premises were not at that stage “left unattended”;
  4. Milton was in breach of the second limb of GC7, as it had failed to pay the monitoring charges in relation to the burglar alarm, so that it was at least reckless as to the risk that the monitoring service might be cut off;
  5. Even if GC7 had not been a condition precedent, a breach of the clause would have been causative of the loss, as it would have been likely that the burglar alarm would have been triggered by the arsonist, which could have prevented the fire.

Jay J therefore gave judgment (with some reluctance) for Brit, on the basis that the condition precedent in relation to the maintenance of the burglar alarm had been breached.

This case illustrates the importance of strict compliance with conditions precedent to liability. Bearing in mind Jay J’s apparent reluctance to find for Brit in the circumstances, the case also emphasises the need for conditions precedent to be carefully drafted to ensure that insurers are able to rely on them in the appropriate circumstances.