Frankly impossible to answer in abstract terms. Delays come and go and the plane may catch up time over the Atlantic. If the connection is impossible, whether it can be cancelled or not depends on the overall delay with the new time. There are lots of LHR-MAD, if they put you on one which is 2 hours later then apart from skipping it you can't ask for anything. If the flights are full or arrival so late that you'd arrive in MAD 6 hours later or the next day, then yes, you should be able to cancel and get some refund. AA may be more or less generous.