Warranty into a suspensive condition

Section 10 of the Insurance Act 2015 abolishes the rule that breach of warranty automatically and permanently discharges the insurer's liability, converting warranties into suspensive conditions under which liability is suspended during the period of breach but resumes once the breach is remedied.

Definition §

Section 10 of the Insurance Act 2015 is one of the most significant reforms of warranty law in modern English insurance jurisprudence. It abolishes the rule, established by the House of Lords in The Good Luck, that breach of warranty automatically and permanently discharges the insurer's liability from the moment of breach. In its place, section 10 provides that breach of warranty suspends the insurer's liability — the insurer is not liable for losses occurring during the period of breach, but liability resumes once the breach has been remedied (provided the breach is capable of remedy).^[1]

The technical effect is to convert warranties from conditions whose breach terminates the contract into "suspensive conditions" — terms whose breach suspends but does not destroy the underlying obligation. This brings English insurance warranty law into closer alignment with general contractual principles and with international comparators.^[2]

The reform was a direct response to the recommendations of the Law Commission and the Scottish Law Commission in their 2014 report. They considered that the automatic discharge rule produced disproportionate outcomes — for example, an insurer being entitled to refuse a fire claim solely because of an unrelated and long-since-remedied breach of an alarm warranty.^[3]

Legal / Regulatory basis §

The statutory text is in section 10 of the 2015 Act. Subsection (1) provides that "Any rule of law that a breach of a warranty (express or implied) in a contract of insurance results in the discharge of the insurer's liability under the contract is abolished." Subsection (2) provides that an insurer has no liability under a contract of insurance in respect of any loss occurring, or attributable to something happening, after a warranty (express or implied) in the contract has been breached but before the breach has been remedied.^[4]

Subsections (5) and (6) explain what amounts to "remedy" of a breach. Where the warranty requires that, by an ascertainable time, something is to be done (or not done), or a condition is to be fulfilled, or something is (or is not) to be the case, a breach is remedied if the risk to which the warranty relates later becomes essentially the same as that originally contemplated by the parties. In other cases, a breach is remedied if the insured ceases to be in breach.

Section 10(7) preserves rights and remedies in respect of losses occurring (or attributable to something happening) before the breach was remedied. Section 10(5)(b) addresses warranties incapable of remedy (such as a warranty about the state of affairs at inception): in such cases, the period of breach continues for the duration of the policy.

The reform must be read alongside section 11 (terms not relevant to actual loss) which provides additional protection for insureds where the loss is unconnected with the breach. The Law Commission considered that the two reforms work together to achieve a proportionate balance.^[5]

Sections 16 and 17 govern contracting out. Insurers can derogate from section 10 in non-consumer contracts, but only by including a term that is clear and unambiguous and brought to the insured's attention before the contract is entered into. The market response has been mixed: some insurers have retained section 10 as the default, while others have negotiated express derogations in specialist lines.^[6]

How it works in practice §

In practice, the reform has transformed claims handling under warranty-bearing policies. Insurers can no longer rely on a "knockout" warranty defence based on a historic breach that has been remedied before the loss. The factual question — was there a breach, and if so, has it been remedied? — has become central.

For continuing warranties (such as a sprinkler maintenance warranty), the analysis follows section 10(2): if the warranty was breached, was the breach remedied before the loss occurred? If the answer is yes, the insurer is on risk for the loss. For affirmative warranties (such as a warranty that the premises are equipped with a particular alarm system at inception), the breach may be incapable of remedy if the underlying state of affairs cannot be reinstated to match the contemplated risk.

Brokers and risk managers manage section 10 issues by maintaining contemporaneous records of compliance with warranties — sprinkler maintenance logs, alarm test certificates, security audit reports — that can be produced in the event of a claim. Where a warranty has been breached, evidence of remedy (with timing) is often the key factual question. Insurers, conversely, build evidence of breach into their claims investigations.

The interaction with section 11 is important. Even where a breach has not been remedied, section 11 prevents the insurer from declining the claim if the breach was of a term tending to reduce the risk of loss of a particular kind, location or time, and the insured can show that the breach could not have increased the risk of the loss that actually occurred. Section 10 and section 11 thus operate as complementary protections, and many claims will engage both provisions.^[7]

The reform applies to all non-consumer insurance and reinsurance contracts entered into, varied or renewed on or after 12 August 2016. Older policies remain subject to the Good Luck rule unless they have been varied or renewed since commencement.^[8]

Common variations §

The practical effect of section 10 varies by warranty type. For warranties incapable of remedy — such as a warranty about the construction of a building or the qualifications of a key individual — the period of breach continues for the duration of the policy. For warranties capable of remedy — such as a warranty about maintenance, security or operational procedures — the period of breach ends when the breach is remedied, and the insurer is back on risk for subsequent losses.

For warranties relating to specific risks (such as a hot-work permit warranty), the section 11 analysis often supplements section 10: the insurer must demonstrate that breach of the warranty could have increased the risk of the loss that occurred. Where the loss is wholly unrelated to the subject-matter of the warranty, section 11 will frequently dispose of the case in the insured's favour even if the breach was not formally remedied.

In Marine and Aviation lines, where warranty wordings tend to be heavily-negotiated, section 10 has produced a range of bespoke wordings. Some Lloyd's wordings retain a "held covered" mechanism allowing the insured to give notice and pay an additional premium in respect of a breach, while others rely on the default section 10 position.

Consumer insurance is not affected by section 10 of the 2015 Act because the Consumer Insurance (Disclosure and Representations) Act 2012 does not contain an equivalent warranty reform, although the Financial Ombudsman Service routinely applies a proportionate approach in consumer disputes.

Example §

A retailer's commercial policy includes a warranty requiring all security shutters to be closed and locked outside trading hours. In March 2026 the shop manager forgets to lock the shutters one evening; the omission is identified the next morning and corrected immediately. In November 2026 the premises suffer significant fire damage caused by an electrical fault originating in the kitchen.

The insurer cannot decline the fire claim by reference to the March breach. Under section 10, the breach was remedied the following morning and the insurer's liability resumed. Even if the breach had been ongoing at the time of the fire, section 11 would prevent the insurer from declining the claim, since failure to lock the security shutters could not have increased the risk of a kitchen electrical fire. The claim is paid in full.

See also §

• /wiki/warranty-insurance/ — definition of warranty under the 2015 Act
• /wiki/section-11-insurance-act-2015/ — companion provision on irrelevant terms
• /wiki/insurance-act-2015/ — parent statute
• /wiki/marine-insurance-act-1906/ — historical framework for warranties
• /wiki/fair-presentation-of-the-risk/ — related disclosure duty
• /wiki/material-misrepresentation/ — alternative ground for remedy
• /wiki/consumer-insurance-disclosure-and-representations-act-2012/ — consumer counterpart

References §

1. ↑ Insurance Act 2015, section 10, https://www.legislation.gov.uk/ukpga/2015/4/section/10
2. ↑ Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd (The Good Luck) [1992] 1 AC 233
3. ↑ Law Commission and Scottish Law Commission, "Insurance Contract Law: Business Disclosure; Warranties; Insurers' Remedies for Fraudulent Claims; and Late Payment" (Law Com No 353 / Scot Law Com No 238, July 2014), https://lawcom.gov.uk/
4. ↑ Insurance Act 2015, section 10(1)-(2)
5. ↑ Insurance Act 2015, section 11
6. ↑ Insurance Act 2015, sections 16-17
7. ↑ Insurance Act 2015, sections 10 and 11
8. ↑ Insurance Act 2015, section 22