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Notifying insurers about likely claims

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In Maccaferri Limited v Zurich Insurance Plc  [2015] EWHC 1708, Mr Justice Knowles held that an obligation on an insured to notify as soon as possible an event which is likely to give rise to a claim as soon as possible does not import a duty on the part of the insured proactively to make enquiries for such events.

Background

In September 2011, a worker suffered a serious eye injury while he was using a Spenax gun. He sued his employer who in turn sued the company that hired the gun to them who in turn sued the claimant, Maccaferri Limited, which had originally supplied the gun. Maccaferri claimed an indemnity from its public and product liability insurer, Zurich.

The accident occurred on 22 September 2011 and Maccaferri was aware of the accident soon afterwards. It was not until 18 July 2013, however, that Maccaferri was notified that a claim was to be brought against it when it received a solicitors’ letter of claim. On 22 July 2013, Maccaferri notified its broker of the threatened claim and the broker advised Zurich. 

Zurich refused to indemnify Maccaferri on the grounds of late notification. Zurich contended that the Claimant failed to comply with the policy’s notice provision, compliance with which was a condition precedent to liability. The relevant clause stated: 

“The Insured shall give notice in writing to the Insurer as soon as possible after the occurrence of any event likely to give rise to a claim with full particulars thereof. The Insured shall also on receiving verbal or written notice of any claim send same or a copy thereof immediately to the Insurer and shall give all necessary information and assistance to enable the Insurer to deal with, settle or resist any claim as the Insurer may think fit…” 

The first sentence delineates the insured’s duty to notify where there is an event that “is likely to give rise to a claim”. The second sentence deals with the situation where there is an actual claim. 

There was no dispute that Maccaferri had complied with its obligation under the second sentence to notify the insurer immediately on receipt of a claim. Zurich contended, however, that Maccaferri should have given notice under the first sentence in the clause by October 2011 or by July 2012 as they were the points in time which were “as soon as possible after the occurrence of any event likely to give rise to a claim”.

Judgment

Zurich contended that the words “as soon as possible” in the clause indicated that the obligation to notify arises when an insured could with reasonable diligence discover that an event was likely to give rise to a claim. It argued that this meaning was supported by the obligation to provide “full particulars” which imported an obligation for the insured to be ‘proactive’, or which implies a duty of inquiry.

Mr. Justice Knowles rejected this interpretation. He found that it was necessary to establish that an “event”had occurred and that the event must be “likely to give rise to a claim”. He held that the phrase “likely to give rise to a claim” described an event with at least a 50% chance that a claim would be made. The words “as soon as possible” referred simply to the promptness with which the notice in writing was to be given if there had been an event likely to give rise to a claim. Unless expressly provided in the policy, there is no requirement for a “rolling assessment”of claim likelihood required of a policyholder. 

In this case, Mr. Justice Knowles found that at the time of the accident there was not at least a 50% chance that a claim would be brought against Maccaferri. It was a possibility that the accident had been caused by the fault of the Spenax gun but it was also a possibility that there was fault in the way the gun was used, or that there was no fault at all. The accident was serious, but that seriousness did not increase the likelihood of an allegation that there was a fault in the gun. The likelihood of a claim could not be inferred from the happening of an accident and a mere possibility of a claim was not enough to require notification under the clause. 

When the accident occurred in September 2011 Maccaferri had not been blamed so there was not an event “likely to give rise to a claim”. Therefore, there was no failure on the part of Maccaferri to comply with the condition precedent to liability – it had notified the insurers immediately when it was aware of the claim being made against them and it was held that Zurich was obliged to indemnify its insured under the policy. 

Comment

Apart from the factual nicety of whether there was a likely claim, this decision shows that the courts will not require of a policyholder a continuing or “rolling assessment” of claim likelihood when the policy does not provide for it. 

Ben Ogden

Ben Ogden Partner

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