Locations
The High Court recently held that an Insurer can decline cover under an insurance policy for failure to comply with a condition precedent of the contract of insurance even in situations where the failure to comply didn’t contribute to the loss incurred.
The decision was in respect of a claim by a policyholder against an insurer to force it to provide cover for a claim in relation to a fire that broke out on the campus of the National University of Ireland, Maynooth (“NUI Maynooth”).
Background
The Plaintiff Company, Kelly Builders (Rosemount) Limited (“Kelly Builders”) were engaged to carry out works on campus and were insured with HCC Underwriting Agency Limited (“the Insurers”) for normal employers liability and public liability activity.
On the 28 November 2010 a fire broke out when Mr. Brian Feeney, a sub-contractor of Kelly Builders, was carrying out hot works to repair a flat roof on the campus which involved the use of burning, welding and cutting materials.
Mr Feeney first attempted to extinguish the fire using an extinguisher he kept on site with him while carrying out this type of work. When this fire extinguisher wouldn’t work he made a second attempt to extinguish the fire using an extinguisher he acquired from a member of the public on the campus. The second extinguisher also did not work and the fire continued to spread, causing extensive damage to the roof of the premises.
Kelly Builders sought to rely on their insurance policy.
Contract of Insurance
The contract of insurance entered into between Kelly Builders and the Insurers was subject to a number of conditions precedent including condition 7(a) which stated that “suitable and fully charged fire extinguishers….must be kept available for immediate use near the scene of operations”.
The Insurers argued that Kelly Builders were in breach of condition 7(a) of the policy by not having a “suitable and fully charged” fire extinguisher available on site.
The Decision
The Court held that a condition precedent of a contract of insurance is one which must be complied with before the contractual obligation to indemnify takes effect and that the onus of proof rests on the Insurers to show non-compliance of these conditions.
The Court found that the requirement under condition 7(a) could have been met by having one suitable extinguisher and, for this reason, proceeded only to consider the suitability of the first extinguisher used by Mr Feeney and which he had kept on site with him while carrying out this work.
The Court was satisfied that the type of fire extinguisher kept by Mr Feeney, which was a 6kg ABC dry powder extinguisher, was a “suitable” type of extinguisher and, on the evidence of Mr Feeney, was suitable for use.
It was accepted by the experts on both sides that “fully charged” in the context of a fire extinguisher meant that it must have dry powder and must be pressurised. When the extinguisher was examined some months later by various experts there was no dispute that it was depressurised and had no expellant gas.
The Court was satisfied on the evidence produced by the Insurers that, on the balance of probabilities, the extinguisher was not fully charged at the time of the fire and so did not comply with condition 7(a).
Ultimately the Court found that, despite the fact that the presence of a fully charged fire extinguisher would have made no difference to the outcome of the fire, it was compelled to dismiss Kelly Builders’ claim for specific performance of the contract of insurance for non-compliance with the condition precedent.
This Judgement serves as a reminder to policyholders that the obligation rests on them to ensure that they fully comply with conditions precedent to their insurance policy if they wish to have the benefit of the cover in the event of a claim. It also highlights that the onus of proof rests with Insurers to show that there was a breach of the relevant condition should cover be declined for that reason.
Judgement can be found here.
Kelly Builders (Rosemount) Limited –v- HCC Underwriting Agency Limited [2016] IEHC 72 Author: Elizabeth Linehan