Representations, warranties and conditions precedent: Lonham Group v Scotbeef

In Lonham Group Ltd v Scotbeef Ltd [2025] EWCA Civ 203, the Court of Appeal clarified when insurance policy clauses constitute pre-contractual representations or enforceable warranties and conditions precedent under the Insurance Act 2015, providing important guidance for both insurers and policyholders.

In the landmark decision, the Court of Appeal provided crucial guidance on: 

• whether clauses of an insurance policy were warranties and conditions precedent to insurers liability under the policy (such that section 10 of the Insurance Act 2015 (the 2015 Act) applied where there was a breach) and;
• whether a clause was a representation (such that Section 3 of the 2015 Act applied in context of the duty of fair presentation of risk).

Although not a property damage claim, the case is of importance due to its consideration and guidance relating to the provisions of the 2015 Act.

Case background

This case arose from a dispute between D&S Storage Limited, a refrigeration and transportation company, (D&S) and Scotbeef Limited, a meat producer (Scotbeef) when D&S transferred mould-contaminated meat to Scotbeef which could not be sold.

When the dispute first arose, D&S attempted to limit its liability to £25,000 based on the Food Storage and Distribution Federation terms. However, the Court found those terms were not incorporated into their contract with Scotbeef, leading to a ruling in favour of Scotbeef for the full claim amount of £395,588.

This decision precipitated D&S's insolvency, prompting Scotbeef to pursue the claim direct against D&S’s insurer under the Third Parties (Rights Against Insurers) Act 2010.

The insurer contested the claim, arguing that D&S had not adhered to a condition precedent by failing to incorporate the specified terms into the contract. The policy in question included a "Duty of Assured" clause, which required D&S to:

1. declare all trading conditions at the start of the policy,
2. trade under the conditions declared to insurers, and
3. take all reasonable steps to ensure that the trading conditions were incorporated into all contracts during the policy period.

The High Court initially found that the entire clause related to pre-contractual representations and thus fell under Part 2 of the 2015 Act, dealing with the fair presentation of the risk. The High Court held that the insurer could not rely on these clauses to deny liability, nor had they claimed any proportionate remedies under Section 8 of the 2015 Act (for example, adjusting the premium or reducing the amount paid on the claim).

Court of Appeal's ruling and interpretation of the Insurance Act

However, the Court of Appeal overturned this decision, differentiating between the sub clauses under the Duty of Assured in the policy.

It clarified that while the first clause was indeed a pre-contractual representation, the subsequent clauses were both warranties and conditions precedent, focusing on D&S's ongoing business operations. The Court of Appeal emphasised that these were clearly intended as ongoing obligations under the policy, as indicated by their placement under "General Conditions, Exclusions and Observance" and the explicit mention that they were conditions precedent to liability.

This interpretation allowed the insurer to avoid the claim entirely due to D&S’s breach of these conditions, as they had not incorporated the FSDF Terms into their contract with Scotbeef (Part 3 of the 2015 Act, Section 10(2)).

The Court of Appeal also dismissed the notion that the Duty of Assured clause in the policy was an attempt to contract out of the 2015 Act, noting that the clause was designed to be in accordance with the 2015 Act.

Key takeaways for insurers 

This decision is important guidance by the Court of Appeal as to what constitutes a pre-contractual representation and what constitutes a warranty or condition precedent, and insurers remedies under the 2015 Act.  

It also underscores the importance for policyholders to clearly understand and comply with the terms of their insurance policies.