Pressure Vessel Warranty and Late Notification
Apex Engineering Ltd holds a commercial combined policy with Sentinel Insurance for 1 January to 31 December. The policy contains a 'Pressure Systems Warranty': 'The Insured warrants that all pressure vessels are inspected annually by a competent person.' It also contains a claims condition: 'The Insured must notify the Insurer immediately of any occurrence which may give rise to a claim.' Apex's inspection was due on 15 March but was not carried out until 20 June because the contractor cancelled twice. On 10 May a pressure vessel exploded, injuring an employee and damaging the plant. Apex notified Sentinel on 25 July, 45 days after the policy expired, because it was dealing with the HSE investigation. Sentinel denies the claim, relying on the warranty and late notification. The explosion was caused by a faulty pressure relief valve that would have been identified by the overdue inspection.
1. What is the effect of the breach of the Pressure Systems Warranty under the Insurance Act 2015?
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The policy calls the term a warranty. IA 2015 s.10 abolishes the old rule that breach of warranty discharges the insurer. Instead, breach suspends cover during the period of breach. The inspection was due on 15 March and was not done until 20 June. Cover was therefore suspended from 15 March to 20 June. The explosion on 10 May occurred during the suspension, so Sentinel is not liable for that loss. Sentinel does not need to show that the breach caused the explosion under s.10; the suspension does the work. Section 11 may override s.10 only if the term is not relevant to the actual loss. Here the inspection warranty is directly relevant to the pressure vessel explosion; compliance would tend to reduce the risk of that loss. So s.11 does not help Apex. The claim fails on the warranty.
2. Can Sentinel rely on the late notification condition?
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The notification clause says the insured 'must notify immediately'. Whether it is a condition precedent to liability depends on its wording and the policy as a whole. If it is a condition precedent, late notification can defeat the claim even without prejudice; if it is an innominate term, Sentinel must show prejudice. A 45-day delay after policy expiry, while the HSE investigation was ongoing, is unlikely to be 'immediate'. The investigation may explain the delay but does not usually excuse a condition precedent. IA 2015 s.11 does not assist: notification is not relevant to the actual loss, but compliance with it would not tend to reduce the risk of the loss; s.11 requires both. So Sentinel has a second, independent defence. Apex should check whether the policy defines 'immediate' or requires a claims notification form, and whether Sentinel suffered prejudice.
3. If the explosion had been caused by a vehicle reversing into an external pipe, and the inspection had still been overdue, would the outcome be different?
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Section 11 would change the result. The inspection warranty is relevant to pressure vessel integrity, not to a vehicle reversing into an external pipe. Compliance with annual inspection would not tend to reduce the risk of that collision. Section 11 therefore makes the warranty of no effect for that loss, even though the breach was continuing. The claim would not be defeated by the warranty. Sentinel could still rely on late notification if the clause is a condition precedent, so the outcome would depend on that separate issue. The example shows that s.11 is loss-specific: a warranty can be effective for one claim and ineffective for another.