Last Friday, judgment was given in a case brought by Maccaferri Limited (civil engineers) regarding the validity of a notification made under its public and product liability policy. The insured sought a declaration that its insurer was obliged to provide an indemnity in respect of the insured’s liability arising from a personal injury claim. Mr McKenna suffered a serious eye injury from a Spenax gun used to attach wire caging together. He sued his employer, which resulted in litigation against the insured who rented out the gun.
The date of the accident was 22 September 2011. On 18 July 2013, the insured received a solicitors’ letter informing it that a claim was to be brought against it. The insured notified its broker of that claim on 22 July 2013 and the broker advised the insurer. The insurer declined to provide an indemnity because it argued that the insured had failed to comply with a condition precedent regarding notification of a claim. The insurer asserted that notice in writing ought to have been given as early as October 2011.
This condition precedent 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 intimate or 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 Judge accepted that, in declining the indemnity, the defendant insurer had acted in good faith. However, he held that the insurer was obliged to indemnify the insured under the policy and it could not be argued that an earlier notification under this wording was necessary to trigger indemnity.
The defendant insurer had argued that on the construction of the first sentence of the clause, and in particular with the words “as soon as possible”, a degree of investigation was required by the insured and that the obligation to notify arose when an insured could with reasonable diligence discover that an event was likely to give rise to a claim. That was very soon after the incident and, as notification did not happen at that point, there was a breach of the condition precedent and no indemnity fell to be given under the policy.
The Judge did not agree. He said it was necessary to establish under this wording that there was an “event” and furthermore that this was “likely” to give rise to a claim; the words “as soon as possible” referred simply 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. For the obligation to notify to arise under this wording, there needed to be an event (i.e. the accident) that was “likely” to give rise to a claim against the insured, meaning that there was then at least a fifty per cent chance of a claim arising.
The Judge found that at the time of the accident “it was a possibility, but not more, that the accident involved a fault in the gun.” The seriousness of the accident did not increase the likelihood that the allegation would be that there was a fault in the gun. At least in this context, the likelihood of a claim cannot simply be inferred from the happening of an accident.
Furthermore, unless the policy provided for it, which this policy did not, there is no room for a continuing or “rolling assessment” of claim likelihood to be required of a policyholder.
This case upholds the well-known principle in Layher Ltd v Lowe (2000) that “likely” in this context means at least a fifty per cent chance of a claim. It is also interesting for its focus on whether under the policy wording before the Court, an insured could be under some proactive duty to investigate whether a claim might be triggered; in this case the Judge said it could not be so construed but if clear words to that effect were in fact used then this could be the outcome. As to any wider application of the judgment, it must be looked at in the context of the specific terms of the liability policy in issue and the facts of the case, which should both be borne in mind when applying the findings more widely.
Further reading: Maccaferri Limited v Zurich Insurance PLC  EWHC 1708 (Comm)