16 October 2026 
Policy liability is an insurer’s responsibility to cover a claim. When an incident happens and you report a claim, the insurer will decide whether they are obligated to compensate your business under your insurance policy. This decision will be based on the particulars of the incident. It will also depend on your compliance with the conditions set out in your policy wording.
Common Conditions for Policy Liability
There are several basic checks that the insurance company will perform, such as ensuring that the policy is in date and that the statement of fact is accurate. It can be easy to make a mistake on a statement of fact, or to fail to update information that has become outdated. Inaccurate information in a statement of fact can lead to a policy being voided or cover being declined. Therefore, it is important to check a statement of fact and ensure it is correct, even when renewing an existing policy.
When assessing policy liability, the insurer will determine the nature of the incident and decide whether it is covered by the policy. Policies often feature a wide range of exclusions, and these can catch someone out when an incident occurs. An event that is seemingly covered can still be excluded based on an additional policy condition. For example, a policy may have fire damage listed as an insured peril. However, damage caused by arson or deliberate acts may be excluded. It is important to check your policy wording and ensure that your business is covered for events that are more likely to occur, depending on the nature of your business.
Your insurance policy will feature conditions more specific to your business and how it operates. If your business is deemed to be a higher risk, or if the work carried out is seen as hazardous, then these conditions will be more stringent. For example, a manufacturing business with high value equipment on site is likely to have policy conditions requiring the premises to have CCTV and security alarms, and for these systems to be monitored. More stringent security conditions often reflect a higher value, higher risk business. By contrast, policies for businesses that don’t hold physical stock, or have very low public foot traffic, are less likely to include extensive security conditions.
Find out more about Business Interruption: the difference in cover here
Common Reasons for Repudiation
Policy wordings are often overlooked, but they contain important information that directly effects your cover. This includes policy conditions that your insurer expects you to comply with when assessing policy liability.
Common policy conditions that can catch policyholders out are maintenance conditions. Policies often require equipment to be regularly maintained or serviced. Failure to follow these requirements can lead to the claim being repudiated, particularly if one of these machines is the cause of the peril.
Your policy may also specify that the maintenance or service must be carried out by a qualified technician, often someone from outside your company. If this policy condition has not been satisfied and a machine is the cause of the claim, then your insurer is likely to repudiate the claim.
Material to the Claim
For a claim to be repudiated due to failing to adhere to a condition, the condition must be shown to be material, or relevant, to the nature of the peril. For example, failing to properly service fire extinguishers would likely be material to a claim for fire damage, and so cover could be denied on this basis. However, if the policyholder suffered a flood, the fire extinguisher condition would not be relevant and so would not be a basis to repudiate the claim.
There are some policy conditions that need to be met regardless of the nature of the peril. In your policy, there will likely be conditions that are marked as ‘precedent to liability’. These conditions must be complied with regardless of the nature of the claim. Failure to abide by these policies is likely to lead to your policy being voided. A common example of a condition precedent to liability is the need to report a claim within a specified window. Failing to do this can lead to your insurer repudiating the claim, even though the reason may not be directly related to the peril.
What can you do if policy liability is denied?
When your insurer repudiates your claim, there are still some options left to pursue. Initially, you can negotiate with your insurer to try and resolve the issue. If this doesn’t work, you still have the option to escalate the issue to the financial ombudsman service. This must be done within six months of the final decision by the Insurer.
If you’re unsure what to do with your claim, or if your claim has been repudiated, then Major Loss ltd can help you. We will guide you through the claim process, and we can help to reduce the chance of your claim being repudiated. We will gather the relevant information and documents to show that your business has complied with the conditions in your policy and demonstrate to your insurer that cover should be provided. To discuss how we can help your business, give us a call on 0808 161 7021.