MacCaferri Ltd v Zurich Insurance plc
In this case the Commercial Court considered the meaning of the words “as soon as possible” in the notification clause of a liability policy. In particular, the court considered whether these words created a duty of inquiry, so as to in effect require the assured to undertake a “rolling assessment” of claims likelihood, or whether they simply referred to the promptness with which notice must be given.
The liability policy in question included a clause beginning with the following sentence:
“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.”
It was argued by the insurer, Zurich Insurance plc (Z), that the words “as soon as possible” 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. Z argued that this interpretation was supported by the obligation to provide “full particulars”, which (Z argued) imports an obligation on the part of the assured to be “proactive” or implied a duty of inquiry.
Against this, the assured MacCaferri Ltd (M) argued that the words “as soon as possible” simply referred to the promptness with which notice in writing is to be given if there has been an event likely to give rise to a claim.
The court declined to accept Z’s argument as to the extended meaning of the words in question, preferring instead the simple interpretation proposed by M. In doing so, it concluded that there was no room for a continuing or “rolling assessment” of claim likelihood to be required of a policyholder when the policy does not provide for it.
Applying this conclusion to the facts, the court went on to hold that the occurrence of the accident giving rise to the liability was not in itself an event “likely to give rise to a claim”. This was on the basis that, when the accident occurred, there was not, in the court’s view, at least a 50% chance that a claim against M would eventuate.
The accident was very serious, but that seriousness did not increase the likelihood that an allegation of wrongdoing would be made against M in particular. In the context of this case, the likelihood of a claim could not simply be inferred from the happening of an accident. Accordingly, on the facts, M had not breached the notification provisions in waiting until it received a solicitors’ letter informing it that a claim was to be made against it before advising Z.
The case provides useful clarification on the meaning of a phrase which is often encountered in notification provisions. It is also interesting in emphasizing that it is the likelihood of a claim against the assured, rather than the seriousness of the incident, which is key to assessing whether or not a circumstance should be notified to insurers.
Proper compliance with notification clauses is of the utmost importance, as failure to do so risks jeopardising the payment of an otherwise good claim. However, the need to make appropriate notifications must be balanced against the need to avoid making notifications which are, out of an abundance of caution, overly broad, speculative and/or insufficiently specific. If in doubt as to how to proceed, assureds should seek guidance from their insurance, and where necessary legal, advisors.