Conditions and Warranties in Nigerian Insurance Law

Your shop policy says the burglar alarm must be switched on whenever the premises are closed. One evening you forget. That same night a burglar breaks in and clears the shelves. Does the insurer have to pay? Under the old common law the answer was no, whatever really caused the loss. The English court said so in Roberts v Eagle Star Insurance Co, where an insured who failed to switch on his alarm could not recover.¹ Under section 65 of the Nigerian Insurance Industry Reform Act 2025 (NIIRA), the answer is much less certain, and that change is the main story of this article.

Conditions and warranties are the terms that decide most real claims, because insurers rarely lose on the formation of the contract but often win on what the insured promised to do afterwards. This article explains what each term is, how courts treated breaches at common law, how section 65 reformed them for non-marine insurance, and how marine insurance now follows a different path. It follows Non-Disclosure and Misrepresentation in Nigerian Insurance Contracts.

1. The words do not mean what they mean in contract law

In an ordinary commercial contract, a condition is a major term whose breach lets the innocent party end the contract, while a warranty is a minor term that gives only a claim for damages. In insurance, the terms share names and little else. English courts said long ago that in an insurance policy a warranty is generally a condition, and that the matter needed no lengthy discussion.² In practice, breach of either made the policy voidable.

There is still a useful working distinction. Warranties relate to the risk itself, such as how the property will be kept or used. Conditions are collateral stipulations, for example about claims procedure and the insurer’s rights once a loss happens. Whether a particular term is one or the other depends on the intention of the parties, as shown by the whole policy, not on the label.³

2. Conditions

An ordinary condition is a term that neither avoids the policy on breach nor limits the risk, but imposes duties on the insured. Typical examples are a duty to tell the insurer about other policies on the same property, a duty to pay the premium, and a duty to keep a vehicle in efficient and safe condition. In Hauwa v Nigeria People’s Insurance Co, the court accepted that a term requiring the insured to take reasonable steps to safeguard a vehicle and maintain it in a roadworthy state was a condition of the motor policy.⁴ Some conditions are implied: that the parties observe utmost good faith, that the subject matter exists at inception, and that the insured has an insurable interest.

A condition becomes a condition precedent where the policy says that performance is a precondition to the insurer’s liability. There are three kinds.

The first goes to the validity of the contract itself: offer and acceptance, consideration, intention and agreement on the essentials. The old rule that non-payment of premium did not discharge the insurer has been replaced by statute. Section 60 of NIIRA makes advance payment a condition of valid cover, as we saw in Premiums and the Risk Factor in Nigerian Insurance Law.

The second is a condition precedent to the attaching of the risk. The insurer does not assume the risk until the insured performs, and if the loss comes first the insurer is not liable. These clauses are common in property and liability policies. In Roberts v Eagle Star, putting the alarm into operation was a condition precedent to liability.⁵ In Jia Enterprises (Electrical) Ltd v British Commonwealth Insurance Co, the insured lost because the premises lacked the fire extinguishers the policy required and the company records were not kept in a fireproof safe.⁶ Policies often tie performance of every term to the insurer’s duty to pay. The policy in Hauwa made the performance of all terms, and the truth of the proposal answers, conditions precedent to any liability.⁷

The third is a condition precedent to the insurer’s liability to honour a claim: giving notice of a loss, supplying documents and particulars, and passing on any claim made by a third party. The notice of anticipated proceedings in Wuraola and Haway is the classic motor example, and Bamidele concerned notice of death.⁸

3. How breach of a condition plays out

At common law the insurer who proves a breach of a condition precedent may repudiate. Whether a term is a condition precedent to liability or only a collateral term that sounds in damages depends on the construction of the policy. Where the term is expressed in general language, substantial compliance is enough. Where the policy says the cover ceases on breach, that stipulation is valid and binding, as in Mokwe v Royal Exchange Assurance and Fadayomi v Mercury Assurance.⁹

A breach of a claims condition does not always end the matter. In Yorkshire Insurance Co v Haway, the insured never told the insurer of an accident, and six months later the insurer received a third party’s claim and paid it under compulsion of law. The Supreme Court held that the insurer was entitled to recover the money from the insured, because paying without telling him of the breach did not stop it from relying on the breach afterwards.¹⁰ The same idea now appears in section 90 of NIIRA, which requires an insurer to satisfy a judgment against its insured for covered liability even where it could have avoided the policy.¹¹ Section 88 goes further for compulsory motor claims: any condition saying that liability ceases because something was done or left undone after the event, such as failing to give notice, has no effect against the third party, though the insurer may still require the insured to repay what it paid out.¹²

Insurers can waive a condition, and waiver is a major source of litigation. An insurer waives if it issues a policy knowing a condition has been broken, or accepts premium or goes to arbitration in a way that suggests the policy is valid. Where notice is defective, the insurer has a duty to point out the defect before time expires. In Jammal Transport Nigeria Ltd v African Insurance Co, the insured’s managing director phoned in news of an accident, the insurer told him to come and report in writing, and the court held that the condition of written notice within seven days was waived.¹³

4. Warranties

A warranty is a term by which the insured promises that a state of facts exists, will continue to exist, or that something will be done. Viscount Finlay explained in Dawson v Bonnin that no special word is required; any words showing that a state of facts is a term of the contract are enough, and if the warranty is not made good, the insurer can treat the policy as void.¹⁴ Warranties normally appear in the proposal form and the policy.

The main source is the “basis of the contract” clause in the proposal form, which converts every answer into a warranty. The proposal becomes the foundation of the contract, and any untrue answer entitles the insurer to avoid, whether or not the answer mattered. In Dawson, the proposer inserted the wrong garage address for a lorry, which was held immaterial to the risk, yet the House of Lords held that the basis clause entitled the insurer to refuse the fire claim.¹⁵

Three more cases show how severe this was. In Akpata v African Alliance Insurance Co, the deceased had warranted that he held no other life insurance when he did. The fact had nothing to do with his death, but the court held that his estate could not claim.¹⁶ In Narsons (Nigeria) Ltd v Lion of Africa Insurance Co, the insured warranted he would keep the premises safe, did not, and lost his burglary claim.¹⁷ In Roberts v Anglo-Saxon Insurance Association, a car warranted for commercial travelling was burnt while used for another purpose, and the insurer escaped although the use played no part in the fire.¹⁸

A warranty of past or present fact, if false, allowed the insurer to avoid the policy from the start, in the same way as a misrepresentation. A promissory warranty, if breached, discharged the insurer from liability from the date of breach, with no need to show that the breach caused the loss. A loss before the breach remained covered. Putting the breach right was no help. In De Hahn v Hartley, the insured warranted a ship would sail with fifty crew. She left with forty-six and took on six more at sea, so she had fifty-two at the time of the loss, but the insurer was held free of liability from the moment of sailing.¹⁹ The only excuses were a change of circumstances making the warranty inapplicable, a later law making compliance unlawful, or waiver. Breach of warranty entitled the insurer to avoid, as Onuh v United Nigerian Insurance Co held.²⁰

5. The statutory reform: section 65

These rules were open to abuse, and Akpata is the clearest illustration. The Insurance Act 2003 reformed them in section 55, and NIIRA re-enacts that section as section 65 for non-marine insurance. It changes the law in five ways.²¹

First, a breach of a term, whether called a warranty or a condition, gives the insurer no right or defence unless the term is material and relevant to the risk or the loss insured against. A small point is worth noticing. The 2003 Act wrongly said “the insured” in this subsection, which read literally would have denied rights to the wrong party. NIIRA corrects this to “the insurer”.

Second, the insurer cannot repudiate the whole or any part of the contract or claim on the ground of a breach unless the breach amounts to fraud or is a breach of a fundamental term. Third, a fundamental term means a warranty, condition or other term that a prudent insurer would regard as material and relevant in deciding to underwrite the risk and fix the premium. Fourth, where the insurer cannot repudiate, it is liable to indemnify the insured only to the extent of the loss that the insured may have suffered if there had been no breach of the term. Fifth, the insurer may still repudiate for breach of a material term before the risk or loss occurs, and may waive a breach at any time.

The distinction between conditions and warranties is now beside the point. What matters is whether the term is material, whether it is fundamental, and whether the breach actually affected the loss. In practice, that overrules the severity of Akpata, Dawson and Roberts v Anglo-Saxon: an immaterial breach gives the insurer nothing. It also softens the notice conditions in Wuraola and Haway, which concern the claim and not the original risk, because a late notice that harmed no one is arguably not material and relevant to the loss.

There are three unresolved points. One is the definition of “fundamental term”. It is the same prudent-insurer test used for materiality in disclosure, and almost every warranty in a proposal form is something the insurer relied on to price the risk. An insurer will say every warranty is fundamental, which would leave section 65(2) with little to do. The way to read section 65 sensibly is to treat “fundamental” as meaning a term whose breach really matters to the risk, but the courts have not yet said so.

Another is section 65(3). Read one way, it leaves the insurer liable only for the loss that would have been suffered had the term been kept. In the alarm example, that means asking what the loss would have been with the alarm on. If the alarm would have prevented the theft, nothing is recoverable; if it would have made no difference, the full loss is. The section therefore brings in a causal test through the back door, which the old common law refused to apply.

The third is pre-loss repudiation. Section 65(4) lets an insurer repudiate for breach of a material term before the risk occurs. A diligent insurer who inspects a shop and finds the alarm missing can cancel the cover before any loss, but once a loss happens its position is far weaker. That is a good reason for insurers to inspect early and for insureds to answer honestly.

6. Marine insurance has its own rules

Section 74 of NIIRA says the rules in Part IX do not apply to marine insurance, and section 116(2) preserves other rules of law for non-marine contracts. Marine insurance therefore skips section 65 and follows Part XIV.²² That part also changes the old harsh law of warranties.

Section 147 abolishes any rule of law under which breach of a warranty discharges the insurer’s liability under the contract. Instead, the insurer has no liability for loss occurring, or attributable to something happening, after the warranty was breached but before the breach is remedied. If the breach is remedied, cover resumes for later losses. A breach is treated as remedied where the risk later becomes essentially the same as that originally contemplated, or the insured stops being in breach. Exceptions cover change of circumstances, subsequent illegality and waiver. This replaces the rule in De Hahn v Hartley, under which fifty-two crew at the time of loss would not have saved the insured.²³

An express warranty may be in any form of words showing the intention to warrant, but it must be in or written upon the policy or incorporated by reference.²⁴ The Act also keeps the traditional implied warranties for marine insurance: that a ship is seaworthy at the start of a voyage policy, that goods voyages use a ship fit to carry them, and that the adventure is lawful.²⁵ A ship that deviates without lawful excuse discharges the insurer from the time of deviation, and a voluntary change of destination does the same, regardless of whether the loss follows.²⁶

So a Lagos importer who ships cargo faces strict rules on the voyage (seaworthiness, deviation), but a softened rule on breach of warranty. The trader who insures the stock in his shop faces the reverse: a reformed rule on breach, but no marine safety net.

7. Common student mistakes

• Using the contract-law meanings of condition and warranty. In insurance they are largely interchangeable at common law.
• Citing Akpata or Dawson as the current rule on basis clauses in non-marine insurance without noting section 65.
• Treating section 65 as applying to marine insurance. Part XIV (section 147) governs it.
• Forgetting that the insurer may still repudiate for fraud or breach of a fundamental term, and may repudiate before the risk occurs.
• Saying the insurer pays nothing after a breach of a material term. Section 65(3) allows partial indemnity.
• Ignoring waiver, such as accepting premium or acting on defective notice after learning of the breach.
• Citing section 55 of the 2003 Act as current law.

8. Problem question approach

First identify the term and the type of policy. For non-marine, ask whether the term is material and relevant to the risk or loss (section 65(1)). If it is, ask whether it is fundamental or the breach amounts to fraud (section 65(2)). If not, apply section 65(3) and calculate the loss that would have occurred without the breach. Check whether the insurer acted before the loss (section 65(4)) and whether it waived the breach. For marine, ask whether a warranty has been breached, whether the breach has been remedied, and whether any statutory exception applies. Finish with the common law result as a comparison if the question asks how the law has changed.

9. Quick reference

Question	Answer	Authority
Are condition and warranty distinct in insurance?	Largely not, at common law	Vaughan v Scottish General
Breach of material and relevant term?	Only then does the insurer gain a right	NIIRA s 65(1)
When can the insurer repudiate?	Fraud or breach of a fundamental term	NIIRA s 65(2)
Fundamental term?	One a prudent insurer treats as material and relevant	NIIRA s 65(6)
Insurer not entitled to repudiate?	Liable to the extent of loss without the breach	NIIRA s 65(3)
Repudiation before loss?	Allowed for material term	NIIRA s 65(4)
Marine breach of warranty?	Cover suspended until remedied	NIIRA s 147
Express warranty must be?	In or incorporated into the policy	NIIRA s 148
Basis of the contract clause?	Converts answers into warranties; reformed for non-marine by s 65	Dawson v Bonnin; Akpata
Waiver?	Accepting premium or acting on defective notice	Jammal Transport v African Insurance

10. Key cases

• Vaughan v Scottish General Insurance Co Ltd [1960] 1 Lloyd’s Rep 479: in insurance a warranty is generally a condition.
• Dawson v Bonnin [1922] 2 AC 413: a basis of the contract clause makes every answer a warranty.
• Akpata v African Alliance Insurance Co Ltd (1967) 3 ALR (Comm) 264: untrue statement about other insurance defeated the claim, though irrelevant to the death.
• Narsons (Nigeria) Ltd v Lion of Africa Insurance Co Ltd (1969) NCLR 185: breach of a warranty to keep premises safe defeated a burglary claim.
• Jia Enterprises (Electrical) Ltd v British Commonwealth Insurance Co Ltd (1965) NMLR 147: missing fire extinguishers and an unsafe record store defeated a fire claim.
• Hauwa v Nigeria People’s Insurance Co Ltd (1972) NCLR 168: duty to safeguard and maintain a vehicle was a condition.
• Yorkshire Insurance Co v Haway (1969) 1 All NLR 352: insurer that paid a third party under compulsion could recover from the insured who breached the notice condition.
• Jammal Transport Nigeria Ltd v African Insurance Co Ltd (1971) 2 NCLR 145: oral notice and the insurer’s response waived the written notice requirement.
• De Hahn v Hartley (1786) 1 TR 343: strict breach of warranty discharged the insurer from the moment of breach.

Footnotes

1. Roberts v Eagle Star Insurance Co Ltd [1960] 1 Lloyd’s Rep 615.
2. Vaughan v Scottish General Insurance Co Ltd [1960] 1 Lloyd’s Rep 479, 481; Palatine Insurance Co Ltd v Gregory [1926] AC 90, 92.
3. Welch v Royal Exchange Assurance Co [1939] 1 KB 294.
4. Hauwa v Nigeria People’s Insurance Co Ltd (1972) NCLR 168.
5. Roberts v Eagle Star Insurance Co Ltd (n 1).
6. Jia Enterprises (Electrical) Ltd v British Commonwealth Insurance Co Ltd (1965) NMLR 147.
7. Hauwa v Nigeria People’s Insurance Co Ltd (n 4).
8. Bamidele v Nigeria General Insurance Co (1973) 3 UILR (Pt 4) 418; Northern Assurance Co Ltd v Wuraola (1969) 1 NMLR 1; Yorkshire Insurance Co v Haway (1969) 1 All NLR 352.
9. Mokwe v Royal Exchange Assurance Co (1974) 4 ECSLR 280; Fadayomi v Mercury Assurance Co Ltd (1973) UILR (Pt IV) 424.
10. Yorkshire Insurance Co v Haway (1969) 1 All NLR 352.
11. Nigerian Insurance Industry Reform Act 2025, s 90(1).
12. Nigerian Insurance Industry Reform Act 2025, s 88(1) and (2).
13. Jammal Transport Nigeria Ltd v African Insurance Co Ltd (1971) 2 NCLR 145.
14. Dawson v Bonnin [1922] 2 AC 413.
15. Dawson v Bonnin (n 14).
16. Akpata v African Alliance Insurance Co Ltd (1967) 3 ALR (Comm) 264.
17. Narsons (Nigeria) Ltd v Lion of Africa Insurance Co Ltd (1969) NCLR 185.
18. Roberts v Anglo-Saxon Insurance Association Ltd (1927) 27 Ll L Rep 313.
19. De Hahn v Hartley (1786) 1 TR 343.
20. Onuh v United Nigerian Insurance Co Ltd (1975) NCLR 413.
21. Nigerian Insurance Industry Reform Act 2025, s 65(1) to (6); Insurance Act, Cap I17, LFN 2004, s 55.
22. Nigerian Insurance Industry Reform Act 2025, ss 74 and 116(2).
23. Nigerian Insurance Industry Reform Act 2025, s 147(1) to (6).
24. Nigerian Insurance Industry Reform Act 2025, s 148.
25. Nigerian Insurance Industry Reform Act 2025, ss 152 to 154.
26. Nigerian Insurance Industry Reform Act 2025, ss 158 and 159.