Condition precedent
A clause whose performance by the insured is a condition of cover itself, so that breach deprives the insured of indemnity without the insurer having to prove prejudice, unlike a mere obligation.
In English law, the insured's obligations under the contract do not all carry the same weight. An ordinary condition, if breached, gives the insurer only a right to damages, that is, a reduction of its liability by the prejudice it proves it suffered. A condition precedent, clearly labeled as such, makes compliance with the obligation the very condition of cover: if the insured did not notify the loss in time, did not obtain the insurer's consent before settling or did not maintain a required protective measure, the insurer is not liable, whether or not it suffered prejudice. The distinction is among the most contested in London litigation, because courts construe restrictively the clauses that forfeit cover: a heading is not enough, the wording must be unambiguous. For the underwriter, it is a disciplinary tool for the obligations on which control of the claim depends, prompt notice, consent before settlement. For the insured and its broker, it is the clause to reread before any step after a loss.
Textbook case: a liability policy provides, as a condition precedent, that every loss must be notified within 30 days of awareness. The insured notifies on day 45. Even if the insurer suffers no prejudice from the delay, it may decline cover; had the same clause been only an ordinary condition, it could have obtained only a reduction equal to its proven prejudice.
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