Under section 33 of the Marine Insurance Act 1906, breach of an insurance warranty automatically discharged the insurer from all liability from the moment of breach, even if the breach was later remedied, and even if it had nothing to do with the eventual loss. The insurer's liability simply ended. Section 10 of the Insurance Act 2015 replaced that rule.
Under section 10, breach of warranty now suspends the insurer's liability rather than ending it. The insurer has no liability for loss occurring, or attributable to something happening, after the warranty is breached but before the breach is remedied. Once the breach is remedied, cover resumes. A warranty is remedied, broadly, when the insured ceases to be in breach: for a time-specific requirement, when it is complied with; for other warranties, when the risk to which the warranty relates becomes essentially the same as originally contemplated.
Suppose a policy warrants that a firm maintains a specified risk-management procedure and, for a period, it lapses. Under the old law, a claim arising long after the procedure was restored could still be refused. Under section 10, the insurer is only off risk while the breach subsists. A loss occurring after the procedure is reinstated is covered again.
The insurer remains free of liability for losses that occur during the period of breach. Section 10 is not a licence to ignore warranties. It simply ends the disproportionate outcome where a remedied and irrelevant breach permanently voided cover. Firms should still comply with every warranty at all times.
Professional indemnity policies for architects and for health and safety consultants may contain warranties or conditions about documentation, sub-consultant checks or contractual controls. The architects' PI guide and the health and safety consultants' PI guide touch on the procedural conditions these firms carry. Apex helps clients understand which policy terms are warranties and how section 10 treats a lapse.
Section 10 deals with the timing of a warranty breach; section 11 deals with terms aimed at particular kinds of loss. The two together dismantle much of the old technical defence armoury.
Section 10 applies to warranties, but professional indemnity policies also contain conditions and conditions precedent, which operate differently. A true warranty is a promise about a state of affairs; its breach is now suspensory under section 10. A condition precedent to liability, by contrast, must be satisfied before the insurer is obliged to pay a particular claim, and section 11 may then bear on whether the insurer can rely on it. Distinguishing these categories in a given wording is a matter of construction, and getting the label wrong can change the outcome. A careful read of the policy's conditions section is worth the time.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.