A Singapore High Court held that a clause in a policy that ‘due observance and fulfilment of the terms provisions and conditions of this policy insofar as they relate to anything to be done or not to be done by the insured … shall be conditions precedent to any liability to make payment’ will not be given effect to if it would give rise to an absurdity and deny cover for the very risks insured.
The label ‘condition precedent’ although a relevant factor is not decisive of the legal effect of a clause, especially where the label is attached generally to a number of terms in the contract of different nature. Some terms are clearly conditions whereas others may not be conditions that have to be fulfilled before there is liability.
Proof of a failure to exercise reasonable care requires proof of recklessness.
The policy included a requirement to ‘exercise reasonable care’ in ensuring that ‘all statutory regulations imposed by any public authority are duly observed and complied with’. The insured had failed to comply with a number of fire safety regulations and the insurer rejected a fire claim. It was held on the evidence that there had been a breach of the specific condition. Proof of a failure to exercise reasonable care requires proof of recklessness. The court found that the insured had been reckless in contravening the fire safety regulations because the failure had not resulted from an oversight but from a clear intention not to comply with the law and to take a risk.
These findings are in accordance with South African law.
The case is Grace Electrical Engineering PTE Ltd v EQ Insurance Co Ltd.