Excavator cover subject to survey

Formation depends on whether the broker's email was an offer capable of acceptance, or only an invitation to treat, and on the effect of the words 'subject to a satisfactory survey'. The email identifies the insurer, the cover, the premium and the subject matter, so it has enough certainty to be an offer. Kestrel's signed proposal and payment are strong evidence of acceptance. But 'subject to a satisfactory survey' can operate in two ways: (a) it may make the contract conditional on the survey, so no contract exists until the survey is satisfactory; or (b) it may be a condition precedent to liability under a contract that already exists. The broker's 'cover note to follow' points towards a contract, but no cover note was issued. On balance, there is a real risk that the survey was a condition precedent to cover, and the theft occurred before it. If the survey condition is a condition precedent to liability, the insurer is not liable for a loss before satisfaction, even if a contract exists. Kestrel's strongest argument is that the broker had authority to bind immediate cover and that payment was accepted unconditionally; that needs evidence of the broker's authority and market practice. If no contract existed, there is no insurance claim, but Kestrel may have a broker negligence claim.

Under s.10 of the Insurance Act 2015, breach of a warranty does not automatically terminate the contract. It suspends the insurer's liability for the period of breach. If the excavator was required to be kept in a locked compound 'at all times when not in use' and it was left in an unlocked compound, the warranty was breached at the time of theft. The insurer is therefore not liable for that theft. Once the breach is remedied, cover is reinstated for future losses; the insurer cannot avoid the policy for the breach. Section 11 could help Kestrel only if the warranty were not relevant to the actual loss. A locked-compound warranty is directly relevant to theft risk, so s.11 does not assist. The result is no cover for this loss, but the policy continues.

Kestrel may have a claim against the broker in contract and/or negligence. A broker instructed to arrange cover must exercise reasonable skill and care, explain clearly when cover starts, and either obtain interim cover or warn that none exists until the survey. The email 'cover note to follow' may have created a misleading impression of immediate cover. Damages are normally measured by the expectation loss: what Kestrel would have recovered under the policy if the broker had done its job, less premium saved, and less any sum Kestrel would still have borne. Contributory negligence is likely: Kestrel knew the survey was booked for 15 May and left a £78,000 excavator in an unlocked compound. The court would reduce damages accordingly. Kestrel may also complain to FOS if it is an eligible micro-enterprise, but a £78,000 claim is well within the FOS limit. The broker's professional indemnity insurer would be the practical target.