Judges dismisses 'waiver by election' holiday appeal

Kosmar Villa Holidays v Syndicate 1243 (Court of Appeal - 29 February 2008)

This is the case where last year the judge held that Kosmar's liability insurers, through handling a claim against Kosmar following a swimming pool accident in Corfu and without any reservation of rights, had "waived" (by election) what would otherwise have been their right to reject Kosmar's claim for indemnity by reason of late notification (breach of condition precedent) (Post, 24 May 2007).

Handling the claim meant, so the judge held, that insurers had chosen ("elected") not to take the late notification point and were bound by that choice.

The Court of Appeal has now reversed this decision, holding that - just as in the case of breach of warranty - breach of condition precedent automatically discharges insurers from obligation to indemnify (so that there is no need for them to make any choice at all and this "waiver by election" cannot rise).


In terms of pure insurance law the Court of Appeal's decision is an interesting and important development. In practice, however, insurers should in appropriate cases continue to exercise caution and bear in mind that exercising a right to conduct the defence of a claim may well deprive them of the right to avoid the policy itself, and that, even in the cases of breach of condition, they may become "stopped" from changing their mind if the insured can demonstrate "detrimental reliance" on their apparent decision to accept the claim. - Philip Vallance QC, BLM London.

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