Category: Insurance case law · Reviewed by Tim Roche, Director · PI & Commercial · Last reviewed June 2026
Court of Appeal decision on the construction of “all reasonable precautions” conditions in commercial insurance policies, and the boundary between conditions, warranties and the duty of disclosure in a burglary claim.
AC Ward & Son Ltd was a long-established wholesale and retail business holding a commercial combined policy with Lloyd’s syndicates managed by Catlin (Five) Ltd. The policy covered the insured premises against, among other things, theft following forcible and violent entry. The premises were burgled and a substantial quantity of stock was stolen.
The insurer declined the claim. It relied on a number of policy provisions, including a condition requiring the insured to take all reasonable precautions to prevent loss, damage or accident and to maintain in good order all security and protective devices. The insurer alleged that the insured had failed to take such reasonable precautions in respect of the security of the premises, and that the policy had been avoided or its provisions activated by aspects of the placing presentation and the insured’s conduct.
Additional points were raised concerning the disclosure of features of the premises and the trading pattern, and the construction of certain conditions precedent in the policy. The case is one of a number of decisions of the late 2000s which addressed the longstanding tension between insurers’ use of conditions and warranties to control risk and the courts’ inclination to read such provisions narrowly against the insurer where they would otherwise defeat a claim arising from ordinary commercial negligence.
The first instance judge dismissed the claim. The insured appealed. The Court of Appeal was required to consider both the construction of the reasonable precautions condition and, in the background, the interaction between such conditions and the law of pre-contractual disclosure.
The principal issue was the construction of the reasonable precautions condition. Was it to be read as requiring the insured to avoid any course of conduct which fell short of best practice in security, with the consequence that ordinary negligence would defeat the claim? Or was it to be read more narrowly, as requiring the insured not to recklessly disregard known risks of loss, leaving ordinary negligence to be insured against?
A subsidiary issue concerned the boundary between conditions of the policy and matters of pre-contractual disclosure. Where an insurer wishes to control the risk of loss by reference to standards of security or operational practice, the question arises whether this is better done by way of warranty, condition precedent or simply by a fair presentation of the relevant features at placement. The case provided an opportunity to revisit those distinctions.
The Court of Appeal allowed the insured’s appeal. Applying the established line of authority from Sofi v Prudential Assurance and Fraser v BN Furman (Productions) Ltd, the court held that a reasonable precautions condition in a commercial insurance policy is to be read narrowly. It does not require the insured to avoid ordinary negligence; it requires the insured not to act recklessly in the sense of recognising a risk of loss and deliberately courting it. On the evidence, the insured’s conduct fell short of that standard of recklessness, and the condition was not breached.
The court also addressed the insurer’s contentions on pre-contractual disclosure and the construction of other policy provisions, concluding that they did not avail the insurer on the facts. The decision is consistent with the broader trend in commercial insurance litigation of the late 2000s, in which the courts sought to ensure that the policy responded to the kind of losses for which it had been bought, and were unwilling to allow narrowly drafted conditions to defeat ordinary commercial claims.
The insured was accordingly entitled to recover the loss subject to the policy limit. The judgment is a useful working example of the construction of reasonable precautions clauses in property insurance.
A condition in a commercial insurance policy requiring the insured to take all reasonable precautions does not impose a standard of care equivalent to that owed by an employer or occupier under the general law of negligence. It is breached only where the insured recklessly courts a known risk of loss. Ordinary negligence by the insured or its employees does not defeat the claim.
The duty of pre-contractual disclosure is conceptually distinct from compliance with policy conditions during the currency of the cover. An insurer wishing to control the risk of loss by reference to security or operational standards must do so by clear words, whether in the proposal, by warranty, by condition precedent or by clear disclosure-based terms.
AC Ward & Son v Catlin is the leading modern Court of Appeal authority on the construction of reasonable precautions conditions in commercial property insurance. It is regularly cited in burglary and other property claims, and informs the drafting of conditions and warranties in commercial wordings.
The case has retained importance under the Insurance Act 2015. Sections 9 and 10 of the Act abolish basis of contract clauses and modify the operation of warranties, but do not affect the construction of conditions such as the reasonable precautions provision in issue in AC Ward. The clear line drawn in the case between conditions and the duty of fair presentation under section 3 remains useful in modern coverage disputes.
For brokers, the case is a reminder that policy conditions are part of the architecture of cover and that the strength or weakness of a non-disclosure defence cannot be assessed without reference to the substantive policy response. For insureds, it is a reassuring confirmation that ordinary commercial negligence is the kind of risk that commercial property cover is bought to insure against, and that narrowly drafted conditions will not be construed to defeat that fundamental purpose.
By Matt Bartlett, Director, on 2026-06-06. Next review: 2026-12-06.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-06. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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