A Video Explaining Conditions Precedent and Subsequent

Read the full article at https://www.linkedin.com/pulse/effect-insureds-breach-material-condition-barry-zalma-esq-cfe and see the full video at https://rumble.com/vpqnfu-a-video-explaining-conditions-precedent-and-subsequent.html?mref=6zof&mrefc=2 and at https://youtu.be/Gl8gNfb8CfQ and at https://zalma.com/blog plus more than 4000 posts.

As early as 1897, the Supreme Court of Pennsylvania, in Early v. Hummelstown Mut. Fire Ins. Co, 178 Pa 631, 36 A. 195 (1897) held that it is beyond all question that the plaintiff had forfeited all right of recovery on his policy at the time of the fire, by breaches of material conditions of the insurance contract.

A provision forbidding or limiting additional insurance is intended as a condition upon which the company assumes liability; and the law is well settled that, upon the breach of such a condition, there can be no recovery upon the contract in which it is contained. [Hiatt v. American Ins. Co., 109 S.E.2d 185, 250 N.C. 553 (N.C. 1959)]

Whether a condition precedent or subsequent, the courts of Missouri, in a number of decisions, have held uniformly that a stipulation restricting concurrent insurance is a warranty presumed in law to be material to the risk and that any substantial breach of such warranty ipso facto would work a forfeiture. [Harwood v. National Union Fire Ins. Co., 156 S.W. 475, 170 Mo. App. 298 (Mo. App. 1913)]

The Fifth Circuit noted the Texas Supreme Court’s decision in State Farm Lloyds Ins. Co. v. Maldonado, 963 S.W.2d 38 (Tex. 1998) where the issue of prejudice was never mentioned. In Maldonado, State Farm tendered a defense with a reservation of rights to its insured, Robert, who had been sued for defamation by a former employee, Maldonado. When State Farm would not pay Maldonado’s settlement demand, Maldonado and Robert entered into a private agreement in which Maldonado discharged Robert from further personal liability for Maldonado’s damages. Robert, no longer having any incentive to contest the defamation claim at trial, failed to actively defend the claim through his attorney provided by State Farm. He did not present any evidence, cross-examine any witnesses, or present opening or closing arguments.

ZALMA OPINION

As I have said many times, an insurance policy is a contract. It contains multiple conditions, both precedent and subsequent, which are promises made by the insured to the insurer to act in good faith when obtaining the policy or presenting a claim. If they fail to fulfill a condition or a warranty the insured, by breaking the promises made, they give up the right to any of the benefits of the policy.

© 2021 – Barry Zalma

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