The Separation of Present Representations and Future Warranties in Insurance Contracts: A New Precedent under the Insurance Act 2015

Introduction

The judgment in Lonham Group Ltd v Scotbeef Ltd & Anor ([2025] EWCA Civ 203) represents a milestone in the evolving landscape of insurance law in England and Wales. At its heart lies the question of whether certain clauses in an insurance policy—specifically those governing the insured’s duty to trade on declared terms—should be treated as representations or as warranties. This distinction is central, as it determines whether technical breaches in disclosure trigger complete avoidance of the insurer’s liability or merely suspend cover until remedial measures are taken.

The case involves three primary parties. Scotbeef Ltd, involved in meat production and distribution, brought a claim arising from damaged meat. Lonham Group Ltd, the insurer of DS (D&S Storage Ltd), is in dispute over whether DS’s failure to incorporate approved trade terms into new storage contracts amounted to a breach of warranty. The factual backdrop reveals that DS, which had supplied refrigerated storage to Scotbeef, provided varying references to trade terms over time, shifting from UKWA conditions to FSDF conditions, and ultimately failing to conclusively incorporate these in contracts with Scotbeef. The controversy centers on whether these trading condition clauses fall under the duty of fair presentation (as representations) or act as future warranties constituting conditions precedent.

Summary of the Judgment

The Court of Appeal ultimately ruled in favour of Lonham, holding that the disputed sub-clauses—particularly sub-clauses (ii) and (iii) of the “Duty of Assured Clause”—are to be properly characterized as future warranties and conditions precedent. The crux of the analysis turned on whether these clauses, which regulate the insured’s future trading behaviour through the period of cover, should be read together with the representation contained in sub-clause (i) or treated separately.

The tribunal found that the lower court erred in reading the sub-clauses as a single collective representation. Instead, the judge on appeal held that sub-clause (i) relates to the disclosure of existing trading conditions at policy inception (and is thus governed by the duty of fair presentation under section 3 of the Insurance Act 2015), whereas sub-clauses (ii) and (iii) are unequivocally future warranties which impose ongoing obligations. As a consequence, because DS’s failure to observe the approved trade conditions amounted to a breach of these warranties and occurred before any remedial action could be taken, Lonham is not liable to indemnify DS for the loss in question.

Analysis

1. Precedents Cited

Although the judgment notes that very little authority directly tackling the nuances in the 2015 Act exists, the court drew on several seminal texts and historical principles to scaffold its reasoning:

• De Hahn v Hartley (1786): This early case illustrates the harsh common law approach where any deviation from a warranty (even if immaterial) could void cover—a doctrine embedded in the Marine Insurance Act 1906.
• Chitty on Contracts and Colinvaux's Law Of Insurance: These texts were instrumental in explaining the transformation brought about by the 2015 Act, especially the abolition of the automatic discharge of liability for breaches of warranty.
• Interpretation of Contracts by Lewison: This was cited to emphasize the importance of reading contractual clauses in their overall context and maintaining the integrity of the document’s structure.

The court’s reliance on these authorities underscored the evolution from a rigid, insurer-friendly regime under the 1906 Act towards a more balanced framework under the 2015 Act, where the insured’s duty and the insurer’s right are recalibrated.

2. Legal Reasoning

The heart of the legal reasoning revolved around the proper classification of the clauses contained in the “Duty of Assured Clause” of the insurance policy. The analysis proceeded as follows:

• Differentiation Between Representations and Warranties: The court distinguished sub-clause (i) (which provides a snapshot of the insured’s trading conditions at the inception of the policy) from sub-clauses (ii) and (iii) (which impose ongoing, forward-looking obligations on DS). While the former falls within the duty of fair presentation (governed by sections 2–8 of the Insurance Act 2015), the latter inherently represents promises about future conduct—categorized as warranties.
• Application of the 2015 Act’s Reform Provisions: Under sections 10 and 11 of the Act, a breach of a warranty does not automatically discharge the insurer’s liability; instead, it suspends liability for losses accruing after the breach and prior to remedy. Here, DS’s non-conformance meant that any loss (including that related to Scotbeef’s claim) occurring after the breach would not be indemnified.
• Contractual Construction: The judge emphasized that the policy must be read as a whole, giving effect both to “general conditions” and “specific warranties” embedded in the “Duty of Assured Clause”. By misinterpreting the grouped sub-clauses “all or nothing”, the lower court effectively conflated a pre-contract representation with future obligations, creating analytical and remedial confusion.
• Transparency and Contracting Out: Addressing the appellant’s reliance on transparency requirements in sections 16 and 17 of the Act, the court found that these sections were irrelevant once the clauses were appropriately classified as warranties. No attempt was made by the insurer to contract out of the statutory protections, since the policy expressly stated it was subject to and incorporated the Insurance Act 2015.

3. Impact of the Judgment

This judgment is likely to have a profound impact on non-consumer insurance contracts by clarifying the distinction between pre-contract representations and post-inception warranties. The explicit separation provides insurers and insured parties with clearer guidelines regarding:

• Risk Disclosure: Insured parties must accurately disclose existing conditions at policy inception (representation) without fear that minor deviations in future conduct will trigger absolute avoidance of cover.
• Ongoing Obligations: Future trading behaviours and contractual conditions will now be scrutinized as warranties, subject to the remedial provisions of the 2015 Act. This means that while breaches will suspend liability, they do not terminate coverage automatically once remedial steps are taken.
• Drafting of Insurance Policies: Policymakers and insurers may need to re-evaluate policy language to ensure that the intended obligations are clearly categorized and clearly meet the transparency requirements under the statute.

Ultimately, the decision strengthens the position of insurers when there is clear evidence that contractual obligations related to future conduct have been breached, while still protecting insured parties from overly harsh consequences that stem from minor errors in early disclosure.

4. Complex Concepts Simplified

To aid in understanding, the following are simplified explanations of key concepts in the judgment:

• Representations vs. Warranties: A representation is a statement about the condition or circumstance existing at the time the policy is made. In contrast, a warranty is a promise regarding future behavior or the state of affairs after the policy starts. Misclassifying these can change when, or if, the insurer’s liability is affected.
• Conditions Precedent: These are specific requirements that must be met by the insured before the insurer’s liability attaches. In this case, the failure of DS to trade under the declared approved terms (a future warranty) was a condition precedent; once breached, any loss incurred until the breach is remedied would not be covered.
• Transparency Requirements: These require that any disadvantageous terms in an insurance contract be brought to the attention of the insured in a clear and unambiguous manner. Since the policy explicitly incorporated the 2015 Act provisions, a scrutiny under these requirements was unnecessary once the proper classification of the clause was established.

Conclusion

The Court of Appeal’s judgment in Lonham Group Ltd v Scotbeef Ltd & Anor marks an important turning point in insurance contract law. By distinguishing between the representation of trading conditions already in place at policy inception (sub-clause (i)) and future warranties governing ongoing trading practices (sub-clauses (ii) and (iii)), the ruling sets a clear precedent on how the insurance obligations should be interpreted in light of the reforms brought by the Insurance Act 2015.

This decision ensures that insured parties are not unduly penalized for minor errors in the initial disclosure of risk, while also confirming that insurers are protected when clear, ongoing commitments (warranties) are breached. For the insurance industry, this judgment provides a more balanced framework which may influence future drafting and enforcement of policy terms, ensuring that both parties have clear expectations and remedies under the law.

By clarifying these distinctions, the appellate decision contributes significantly to a more equitable insurance market and underlines the importance of precise contractual construction within the modern statutory framework.