Policy
Part of the terms and conditions for the commercial combined insurance policy was the removal of keys from the safe when the premise was unattended. Olivia’s failure to do so amounts to a breach of this term in the insurance policy. This area of insurance policy breach touches on the principle of “continuing warranty.” It focuses on the need to maintain some aspect of good practices in the life of an insurance policy. The need to remove the safe keys is one aspect of maintenance practices that were supposed to be observed to maintain the commercial combined insurance policy. The failure to do so means that there were new risk elements introduced in the contractual agreement without the insurers’ knowledge. Ignoring the implications of Olivia’s misstep (leaving the keys at the safe) on the risk profile of the current policy means that the insurer suffers a greater risk of loss than the insured. This statement provides grounds for suspending the policy.
Claim
The break-in reported by Olivia was contributed by her failure to abide by the above-mentioned preconditions. Stated differently, the key used to open the safe was obtained from her negligent action of leaving it on the safe, contrary to the contract guidelines, and the failure to maintain the burglar alarm in working condition. The failure to abide by these conditions resulted in the break-in, thereby affecting the policy and claim initiated by Oliver. A combination of these breaches of contractual terms at the same time means that the insurance company may reject the claim and minimize liability on the existing policy. Therefore, Olivia’s failure to remove the safe keys from the premise amounts to a breach of contract as she was required to remove them from the safe when no one was around. Therefore, the insurer may argue non-liability under the clauses provided in section 10 of the Insurance Act 2015, which states that breaches to the terms of an insurance contract should be relevant to the actual loss incurred for a court of law to relieve an insurance company of its obligation to compensate.
In interpreting the above statute, it is important to read the provisions of section 10 alongside those of section 11. Under the latter section of the law, the insurer has to prove that non-compliance with the insurance law was relevant to the actual loss of items. The implication to the insurer is that the claim would have to be settled if the breaches were not relevant to the actual loss in the first place. In other words, if the threshold of materiality is not met, the insurance company may have to pay for the damages claimed. This provision in law makes it difficult to prove negligence because the insurer has to ascertain that breaches to contractual terms were deliberate and not accidental. Indeed, in Olivia’s case, she thought she had set the alarm on when leaving the premises, but this was not the case because, at the time of the burglary, it was not working. The fact that she thought she had activated the alarm means that her actions were not deliberate but accidental. Furthermore, the discovery of the alarm’s faultiness after the occurrence of loss may further cement the belief that her actions were not deliberate but accidental. In this regard, burglary could have a limited impact on the policy.
To prove that Olivia’s actions led to the rejection of her claim, it is important for the insurance company to demonstrate that her non-compliance with the warranty was material to the loss. Given the facts of the case, it is unlikely that Olivia would be able to prove section 11(3) of the Insurance Act because she breached the terms of her contract. This means that the insurance company has strong grounds for rejecting the claim, subject to provisions of section 11 of the Insurance Act 2015. The operationalization of this statute in Olivia’s case means that she has few grounds for disputing a decision to reject her claim. The grounds for rejecting the claims come from the conditions precedent to a contract, which states the grounds for rejecting a claim based on an insured’s inability to abide by the terms of a contract.
Overall, the failure to remove the keys from the safe was a negligent action on Olivia’s part. Drawing from the provisions of Section 11 of the Insurance Act 2015, this act of negligence significantly increased the risk of loss because the thieves could not have gained access to the safe and stolen the money if the key to the safe were not accessible. Therefore, Olivia’s failure to remove the keys from the safe was a direct breach of contractual terms, thereby providing grounds to reject the claim. This negligent act also provides ground for the insurer to minimize liability to the existing policy or reassess current premium payments because it was one of the main duties of the policyholder in her contractual agreement – to remove keys from the safe.