There is a duty to disclose all material facts about a risk to insurers and failure to do so could affect the amount that can be claimed in the event of loss or, even lead to the cover being invalidated.
However, there may be some occasions where the insured is unaware of whether a fact is material or not, and therefore this may not be disclosed to insurers (innocent non-disclosure). This is often the case where a property has become vacant for a period of time.
This advice note offers guidance on when an unoccupancy needs to be disclosed to your insurer(s) and the typical information that insurers may require. Unoccupancy may be categorised as:
1. Void (also referred to as Vacant or Unoccupied)
These are properties which are not tenanted and are unoccupied.
2. Vacant (also referred to as Unoccupied)
The properties have a lease in place, but the tenant is not in occupation (or may only be occupying part of the demise leased to them or have limited attendance during renovation works).
In BOTH cases, insurers should be advised of:
The date the property / unit is due to become (or became) unoccupied.
Details of any refurbishment or other work scheduled, prior to commencement of works.
Confirmation that all combustibles have been removed from the premises.
Confirmation that the water / electricity has been isolated or if these need to be maintained for marketing purposes, and what additional precautions (if any) have been taken.
Details of all additional physical risk protections (including boarding of windows / doors) etc.
Estimated period of unoccupancy / plans for the property.
This is general advice only and you must check your own insurance policy for any unoccupied Guidelines, Warranties or Conditions Precedent.
Although the Lockton 'Asset' policy does not include Warranties or Conditions Precedent for unoccupied locations, other policies do – and it is imperative that you comply with all your insurers’ requirements as advised to you in their documentation.
Warranties and Conditions Precedent
Failure to comply with a Warranty or Condition Precedent could seriously affect the insured’s ability to make a claim, or the amount that insurers will pay in the event of a claim.
Statements made at the inception of a policy which are advised by insurers to be Warranties such as:
the building being occupied or
strict actions that must be taken in the event of Unoccupancy
and/or Warranties contained in a policy need to remain correct / be complied with for the period of the policy, unless insurers are advised, and agree otherwise.
Under the terms of The Insurance Act 2015, breach of a Warranty suspends insurer’s liability under the policy unless and until the breach is remedied by the insured. If a claim occurs while the insured is in breach of a Warranty, insurers will be entitled to avoid the claim.
These could be requirements to notify a claim within a specific period, or for an insured to act in a certain way, or any policy condition which is identified by the insurer as a Condition Precedent (or words to that effect). Some policies contain a Condition Precedent that cover is subject to compliance with all policy terms and conditions.
Prior to the Insurance Act 2015, breach of any Condition Precedent enabled the insurer to avoid all liability for all claims, even if they were unconnected to the breach. Under the terms of The Insurance Act 2015 there must be a relationship between the breach of the Condition Precedent and the loss and any reduction in the amount to be settled for any claim needs to be proportionate to the breach.
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