AIG Europe Limited v Woodman and others
Supreme Court – first reported case on aggregation wording in the solicitors’ minimum terms and conditions
The case involved failed holiday developments in Turkey and Morocco in which the solicitors acted as trustees. The insurers sought a declaration that claims totalling over £10 million made against the solicitors by the investors should be considered as a single claim and therefore subject to the limit of £3 million. The aggregation clause provided that claims could be aggregated if they arose from “similar acts or omissions in a series of related matters or transactions”. The key issue was the meaning of “related matters or transactions”.
The Supreme Court rejected the Court of Appeal’s interpretation that the transactions had to have “an intrinsic relationship with each other and not an extrinsic relationship with a third factor”. That formulation was neither necessary nor satisfactory. The Law Society had chosen not to circumscribe the phrase by any particular set of criteria. Determining whether transactions were related was an acutely fact-sensitive exercise. Viewed objectively, the connecting factors drove Lord Toulson to the conclusion that the transactions in each development were related such that the claims would aggregate by reference to the two developments. On the facts presented, although the developments bore a striking resemblance, the insurers could not aggregate the claims further, as the Turkish and Moroccan developments were separate and unconnected. There would therefore be two claims for insurance purposes.
The Supreme Court appears to have widened the scope for aggregation, eschewing the requirement of co-dependency or intrinsic relationship which had been prescribed by the lower courts. Although aggregation can work in favour of either the insurer or the insured, the ability to cap liability for multiple claims more easily will be welcomed by insurers.
Atlasnavios-Navegacao LDA v Navigators Insurance Co Ltd and others
Court of Appeal – detainment exclusion applied even where the reason for the detainment was an insured peril
A vessel was detained in a Venezuelan port when 132kg of cocaine was found strapped to its hull. The vessel was insured under the Institute War and Strike Clauses 1/10/83. These clauses provide that loss caused by a person acting maliciously is an insured peril (under 1.5). The clauses also exclude cover for “arrest restraint detainment confiscation or expropriation under quarantine regulations or by reason of infringement of any customs or trading regulations” (under 4.1.5). The judge at first instance held that the concealment of cocaine had been a malicious act for the purposes of 1.5 and implied a limitation on the scope of the exclusion where the customs infringement only came about due to the malicious act.
The Court of Appeal deemed that the clauses had to be considered together to determine the ambit of the policy; neither had primacy over the other. It held that if the malicious act was concealing drugs on the vessel, and concealing drugs was an infringement of customs regulations, then the detention was for a breach of customs regulations. There was no justification to exclude an infringement of customs regulations consisting of a malicious act from 4.1.5; this was not supported by the case law.
Basia Lejonvarn v Peter Burgess (1) Lynn Burgess (2)
Court of Appeal - a professional providing gratuitous services to a friend may still owe a duty of care in tort
At their request, the architect provided project management and design services to Mr and Mrs Burgess, who were long-standing friends. No fee was requested by the architect, but there was an understanding that she would be paid for design work later on in the garden project. The relationship broke down and the Burgesses brought proceedings alleging that the architect was responsible for the defective works.
Although there was no contract between the parties, the Court of Appeal held that the architect had assumed responsibility and a duty of care was owed. The services were provided in a professional context. The architect held herself out as having professional skills and carried out those skills knowing that the Burgesses would be relying on her to perform them properly. The Court of Appeal stressed that it was not imposing any positive obligation to carry out the services. However, if the architect chose to undertake the services, then she was under a duty to do so exercising reasonable skill and care.
The decision is a cautionary tale highlighting the dangers of providing gratuitous advice or services. However, the facts were quite specific – this was not a case of ‘off the cuff’ advice and there was an expectation of future payment. Nevertheless professionals must take care.
BPE Solicitors and another v Hughes- Holland (in substitution for Gabriel)
Supreme Court - the SAAMCO principle in the context of a solicitors’ negligence action
Mr Gabriel made a loan to a company believing that it was to be used to develop a property and would be secured by a first charge. His solicitors, BPE, became aware that the loan was to be used to purchase the property, but inadvertently confirmed Mr Gabriel’s misunderstanding. Mr Gabriel lost his money and sued BPE.
The Supreme Court confirmed that showing a loss would not have occurred but for the breach was not always sufficient. Lord Sumption restated the distinction between ‘advice’ cases, where the adviser is responsible for guiding the whole decision-making process, and ‘information’ cases, where the adviser contributes only a limited part of the material on which his client will rely in deciding on a transaction. The SAAMCO principle provided that in the latter, the professional was only liable for the financial consequences of the information being wrong even if the information was critical to the decision to enter into the transaction.
BPE did not assume responsibility for Mr Gabriel’s decision to lend. They were only legally responsible for confirming his assumption. Even if used to fund the development, Mr Gabriel would still have lost his money. Accordingly, his loss was not within the scope of BPE’s duty, but arose from his commercial misjudgement.
The Supreme Court’s decision represents a re-statement of the SAAMCO principle, but also a clarification that the ‘information’ distinction will apply to solicitors more frequently than had been previously understood. The decision expressly overruled previous conveyancing-related cases where the SAAMCO cap was held not to apply if the failure was to provide information which would have shown that the transaction was fraudulent or not viable.
Excalibur Ventures LLC v Texas Keystone Inc and others
Court of Appeal – litigation funders to pay costs on the same basis as the funded party
Excalibur, a shell company with no assets, pursued Texas Keystone for a share (valued at US$1.6 billion) in an oil exploration block in Kurdistan. The claim failed dramatically and Excalibur was ordered to pay the defendant indemnity costs following judicial criticism of its conduct in the action.
Various funders had provided £17.5 million as security for the defendant’s costs on commercial terms in return for a share of any litigation proceeds. There was an estimated shortfall of £4.8 million in respect of the defendant’s costs, representing the difference between standard and indemnity costs, and the issue was whether the funders were liable to pay this shortfall given ‘they’ had not acted improperly.
Upholding the lower court’s decision, the Court of Appeal held that the funders were jointly and severally liable to pay costs on the indemnity basis. The derivative nature of litigation funding means funders will ordinarily pay costs on the same basis as the party they choose to fund.
The Court of Appeal also held the costs order could be made against funders’ parent companies and not only those named in the funding agreement. It dismissed the suggestion that this would “pierce the corporate veil”.
Gard Marine & Energy Ltd v China National Chartering Co Ltd
Supreme Court - breach of a safe port warranty and subrogation
The vessel grounded after leaving the port at Kashima, Japan. On leaving the port the vessel encountered long waves and severe northerly gales, leaving it unable to safely navigate the channel out of the port and it ultimately grounded, becoming a total loss.
Gard Marine & Energy Ltd appealed the decision of the Court of Appeal that the time charterer and the sub-charterer had not breached the safe port warranty when the vessel left the port.
The Supreme Court unanimously dismissed the appeal on the basis that there was no breach of the safe port undertaking. It was common ground that the test for breach of the safe port undertaking was whether the damage sustained by the vessel was caused by an ‘abnormal occurrence’. The Supreme Court held that ‘abnormal occurrence’ should be given its ordinary meaning; something rare and unexpected that the notional charterer would not have in mind. The test was not whether the events that caused the loss were reasonably foreseeable. The two weather conditions had not occurred together at that port before, and no vessel had previously suffered damage due to the conditions at the port.
The Supreme Court also held by a majority that as the demise charter provided joint insurance no subrogated claim could be brought against the time charterer. The majority decision was that the nature of the underlying contract prevented a recovery between co-insureds, with a minority holding that the indemnity meant that the demise charterer had no loss to recover.
Howmet Ltd v Economy Devices Ltd and others
Court of Appeal - manufacturer not liable for defective product
Factory owners claimed damages against a thermolevel manufacturer. The device was installed in heated industrial tanks to detect if the liquid level was too low and a fire hazard. Following two earlier failures of which engineering and facilities managers were aware, there was a change in procedure and float switches ordered. Before they were installed, there was a catastrophic fire when an empty tank’s heater was switched on. The thermolevel failed and no one was around to extinguish the fire. The High Court found that the thermolevels were unreliable and unacceptable as a critical safety device and that the factory personnel’s knowledge of this was attributable to Howmet. As Howmet had no longer relied on the thermolevel to prevent fires, the chain of causation was broken.
Howmet’s appeal failed. The Court of Appeal confirmed that the collective knowledge of operators and mid-level managers should be attributed to the company. The Court of Appeal considered that the manufacturer of a product with a hidden defect that causes damage should be liable for that damage. If the defect is discovered before damage is caused the manufacturer is not generally liable. Where an end user is aware of the defect and continues using the product, resulting in damage, the manufacturer no longer has a continuing duty to the end user. However, if the end user has no alternative, the position may be different.
This decision highlights the responsibility of those who knowingly use defective goods and, depending on the facts, offers a shield for manufacturers and insurers facing subsequent negligence claims.
Impact Funding Solutions Ltd v AIG Europe Insurance Ltd / Wood v Capita Insurance Services Ltd
Supreme Court - speaks twice on contract construction
Guidance has been given on the application of policy exclusions in Impact Funding Solutions Ltd v AIG Europe Insurance Ltd. In this solicitors’ professional indemnity case, the issue was whether a liability owed by solicitors to Impact Funding, who had provided loans to the solicitors’ clients pursuant to a litigation disbursement funding agreement with the solicitors, fell within the ‘trading debts’ exclusion to the wide indemnity cover provided by the policy or whether the liabilities were professionally incurred. The majority in the Supreme Court held that it was a trading liability that the minimum terms were not intended to cover.
Expressing a provision as an exception did not mean that there should be a pre-disposition for narrow construction; contra proferentem had no role in this case. In an illustrative explanation, the Supreme Court referred to a contract to paint housing woodwork ‘except the garage doors’. The words were simply a convenient way of defining the obligation. In the CAR insurance context, this decision suggests certain exemption clauses might not be construed narrowly against the insurer. The words of exception may simply be seen as a way of delineating the scope of the operative ‘All Risks’ cover in respect of the Works. This may particularly affect the correct approach to the exclusion of corrosion, wear and tear and gradual deterioration to the Works (which may be regarded as ‘the garage doors’).
In Wood v Capita Insurance Services Ltd, the Supreme Court considered the tension between the literal and contextual approaches to contract interpretation. The case involved the interpretation of an indemnity in a share purchase agreement relating to an insurance broker. Was the indemnity triggered only by a customer’s claim or complaint or did it include compensation paid following self-reporting of potential mis-selling? The Supreme Court held that the indemnity was restricted to a loss arising from a customer complaint.
The objective meaning of the contractual language had to be ascertained. A court had to look both at the literal meaning of the words and also the contract as a whole. Depending on the nature, formality and quality of its drafting, more or less weight should be given to elements of the wider context. Where there were rival meanings, a court could reach a view about which construction was more consistent with business common sense. A court must also be alive to the possibility that a party has made a bad bargain. It did not matter whether the analysis commenced with the factual background and the implications of rival constructions (the business common sense approach) or a close examination of the relevant language in the contract, so long as the court balanced the indications given by each. In a professionally drafted contract, more weight is likely to be given to the literal meaning (of both the clause and contract as whole). Although this clarification is helpful, applying the approach to an individual clause is likely to remain difficult.
Leeds Beckett University v Travelers Insurance Co Ltd
Inevitable damage is not accidental
Following construction in 1996, large cracks appeared in the university’s student accommodation block in December 2011. The cause was sulphate attack and leaching to below ground concrete blockwork over a period of ten years due to flowing ground water. While it was unknown at the time the policy incepted, contemporaneous construction records revealed a history of significant water problems during construction. The building was deemed to be structurally unsafe and was demolished.
In August 2011, the university had taken out an all risks insurance policy with Travelers which covered various properties including the accommodation block. The university’s claim, estimated at £10 million, was declined.
Mr Justice Coulson dismissed the university’s claim under its all risks policy. The building had not suffered ‘accidental damage’. He held that ‘accidental’ means an event that occurs by chance, which is non-deliberate and provided eight guiding principles. As the blockwork had been subject to mobile ground water since completion of the building in 1996, the damage was already inevitable when the policy was taken out in August 2011.
The court went on to offer a non-binding view as to how the various exclusions to the policy would have applied if the damage had been accidental. Both the gradual deterioration and faulty/defective design exclusions applied on the facts. Gradual deterioration should not be restricted to situations where the property insured deteriorates without any external interaction with the environment. Insurers were also not required to prove negligence in order to rely on the faulty/defective design exclusion.
The various exclusions reintroduced into the cover ‘subsequent damage’ brought about by causes which were not otherwise excluded. The court indicated that ‘subsequent damage’ has to be damage that is different and distinguishable from the original damage and must result from a new or different cause, in order to be brought back within the cover.
DAC Beachcroft successfully acted for Travelers.
Lowick Rose LLP (in liquidation) v Swynson Ltd and another
Supreme Court - legal effect of the extinguishment of a loss in an accountants’ negligence claim
Relying on a due diligence report prepared by the accountants, Swynson made a loan to EMSL. For tax reasons, Mr Hunt, who owned and controlled Swynson, subsequently took over the loan, providing funds to EMSL to enable it to repay the loan to Swynson. Experiencing financial difficulties, EMSL was later wound up.
Mr Hunt and Swynson sued the accountants. The accountants conceded negligence but argued that Swynson had suffered no loss as it had been repaid by EMSL. The trial judge, pointing to the letter of engagement between Swynson and the accountants, ruled that no duty of care was owed to Mr Hunt. He, and the Court of Appeal, allowed the claim, however, on the basis that the repayment of the Swynson loan should be ignored as it amounted to a ‘collateral benefit’, sufficiently unconnected with the investment made on the back of the accountants’ negligence.
The Supreme Court disagreed and held that the repayment of the Swynson loan could not be regarded as collateral and could not be ignored. Swynson therefore suffered no loss. The Court also held that this was not a case of ‘transferred loss’ (ie, Swynson’s loss could not be treated as having been ‘transferred’ to Mr Hunt) and that there was no claim for unjust enrichment (ie, the accountants had not been unjustly enriched through the extinguishment of Swynson’s loss). In doing so, the Supreme Court has given important guidance on the legal concepts of unjust enrichment, transferred loss and collateral benefits. Key to those findings was the fact the repayment of Swynson’s loans discharged the very liability which represented Swynson’s loss and the finding that Mr Hunt’s loan to EMSL was a legitimate, entirely independent, transaction for valuable consideration.
This Supreme Court decision confirms the importance the courts place on separate legal personalities, the corporate veil and a strict interpretation of legal rights and principles. Lord Sumption stressed the need for precedence and legal certainty. ‘Armchair justice’ found no sympathy in this commercial context. It is also a salutary reminder of the crucial part played by letters of engagement in restricting a professional’s duty of care to its client.
McBride v UK Insurance Ltd/Clayton v EUI Ltd
Court of Appeal - credit hire
These judgments, flagged up in last year’s report, provide further endorsement of the Stevens v Equity principle of the ‘lowest reasonable rate’ being applied when assessing basic hire rates. They also provide useful guidance around the applicability of rates evidence where zero excesses cannot be found, as well as the relevance of stand-alone excess waiver products.
In McBride, the Court of Appeal held that Stevens v Equity was consistent with previous decisions and that it had brought the area of basic hire rates into the modern era by focusing on internet searches. It also held that the inability to obtain a nil excess from a mainstream supplier should not as a matter of principle lead to the credit hire company recovering the credit hire rate in full. The guidance is that we should treat the nil excess separately from the comparison exercise between the default credit hire rate and the basic hire rate with an excess. The Court of Appeal did accept it will normally be reasonable for the claimant to seek a nil excess, and that the question would then be how much should be recoverable as the cost of purchasing the nil excess. In McBride, the Defendant had failed to demonstrate that a stand-alone product would have been available to waive the excess. Instead, the £10 extra charged by Accident Exchange was allowed. However, the Court of Appeal has held that a court may well decide to allow the cost of a stand-alone product.
In Clayton, the judge at first instance used a novel approach to arrive at his award. Critical of both sides’ evidence, he awarded a basic hire rate with a 10% uplift notionally to deal with the fact the rates evidence did not come with a zero excess. He also awarded a 15% uplift on the basis the rates obtained by the Defendant were for 28 days rather than seven.
The matter was appealed by Accident Exchange on five grounds. In short, they accused the District Judge of being biased and that he was not entitled to add arbitrary figures just because the Defendant had not obtained adequate evidence. However, the appeal was dismissed in full on the basis the District Judge was entitled to draw upon his considerable experience of dealing with credit hire cases. These were reasonable adjustments.
Although the general facts of the case were fairly fact-specific, it does reiterate that there is a discretion to use a broad-brush approach if evidence is not perfect. In addition, the Court of Appeal again used this as an opportunity to endorse stand-alone excess waiver products. They confirmed that whether the Claimant had heard of such products was irrelevant, and that the admission and acceptance of the stand-alone products should be the norm.
Mic Simmonds v AJ Gammell
Court upholds arbitrators’ decision on meaning of ‘one event’
The reinsured insured the Port of New York, owners of the land on which the World Trade Center stood, during the period of the 9/11 attacks. Following 9/11, the Port received around 10,000 claims from employees involved in the rescue and clean-up operation alleging that the Port had negligently failed to provide adequate protective equipment or proper training and they suffered personal injury (mainly respiratory injuries) as a result. These claims were accepted by the reinsured.
The reinsurance contract defined ‘Loss’ as ‘loss, damage, liability or expense or a series thereof arising from one event’. The reinsurer disputed that the claims and the 9/11 attacks arose from ‘one event’ and argued the claims could not be aggregated.
The dispute was referred to arbitration and by a 2:1 majority the arbitrators concluded that the claims arose from one event, namely the 9/11 attacks. The reinsurers appealed to the court arguing that the arbitrators had made an error of law.
Dismissing the appeal, the court concluded that the arbitrators applied the correct legal test, having considered the relevant case law on aggregation wording. They were entitled to find that there was a significant causal link between the respiratory claims and the 9/11 attacks to constitute ‘one event’, even though they may not be the proximate cause of the claims. The arbitrators’ decision was not unreasonable and therefore the court would not interfere.
Motor Insurers’ Bureau v Moreno
Supreme Court - compensation is calculated according to the law of the state where the accident occurred
Ms Moreno, a UK resident, suffered life-changing injuries whilst on holiday in Greece, when she was run over by an uninsured driver. Liability for the accident was not in dispute. The appeal to the Supreme Court brought by the Motor Insurers’ Bureau (MIB) related to whether the quantum of Ms Moreno’s damages was to be determined in accordance with Greek or English law, the former being compatible with Rome II as “the law of the country in which the damage occurred” but the latter following the interpretation in Jacobs v Motor Insurers’ Bureau.
The confusion arises in respect of Article 7 of the Fourth Motor Directive, which confirms that the injured party may apply for compensation from the compensation body in the member state where he resides, whereas reg 13(2) of the enabling domestic legislation, the Motor Vehicles (Compulsory Insurance) (Information Centre and Compensation Body) Regulations 2003 states: “The compensation body shall compensate … as if it were the body authorised … and the accident had occurred in Great Britain”.
The Supreme Court looked at the holistic development of the Motor Directives and concluded that Jacobs was construed too narrowly. Reg 13(2) must be read as having a purely mechanical or functional operation. Once it is concluded that the scheme of the Directives is to provide a consistent measure of compensation, there is no need to regard reg 13(2)(b) as having any purpose or effect. As such, Ms Moreno’s entitlement to compensation should be measured on a consistent basis by reference to Greek law, that being the law of state in which the accident occurred.
R&S Pilling (t/a Phoenix Engineering)v UK Insurance Ltd
Court of Appeal – ‘use’ of a vehicle
Thomas Holden was a mechanical fitter employed by R&S Pilling t/a Phoenix Engineering. Mr Holden undertook some repairs to his own vehicle in Phoenix’s workshop. During this work, sparks from welding equipment ignited flammable material inside the car. The fire took hold very quickly and soon spread to adjoining premises causing substantial damage. As a result of the fire, Phoenix’s property and public liability insurers paid out sums in excess of £2 million.
Phoenix sought a full recovery from Mr Holden’s motor insurers, UK Insurance Limited (UKI), on the basis that the motor policy covered the losses suffered by Phoenix. UKI disagreed and commenced proceedings against Mr Holden, seeking a declaration that its policy did not cover such losses.
Phoenix was joined as a second Defendant and, in turn, they brought a claim against Mr Holden for an indemnity in respect of the sums paid out by their insurers.
At first instance, the court found that the repairs being undertaken did not constitute ‘use’ of a vehicle on the basis that the car was not being operated in any way.
Phoenix appealed the decision. Delivering the leading judgment in Phoenix’s favour, the Master of the Rolls found that the express wording of the UKI policy and the cover provided by it should not be restricted by reference to the provisions of the Road Traffic Act. Therefore, Mr Holden’s liability to Phoenix in respect of damage caused by the fire was covered by his policy of motor insurance. Applying the reasoning in Vnuk v Triglav that ‘use of the vehicle’ in section 145(3) of the Road Traffic Act must include any use of the vehicle consistent with its normal function, the repair of the vehicle by Mr Holden in these circumstances was ‘use’ of a vehicle and so the policy should respond.
RBS Rights Issue Litigation
Legal advice privilege: the importance of knowing ‘the client’
In this high-profile group action, numerous disgruntled shareholders brought claims against RBS and its directors to recover investment losses following the RBS rights issue just prior to the 2008 financial crisis. The shareholders sought damages under the Financial Services Markets Act 2000 alleging that the prospectus issued by RBS in April 2008 was misleading and inaccurate.
During the litigation, the shareholders sought disclosure and inspection of interview notes, transcripts and other records relating to internal investigations involving interviews by or on behalf of RBS with current and former employees. RBS resisted disclosure on the basis that the documents attracted legal advice privilege or alternatively they were lawyers’ privileged working papers.
The High Court followed the Court of Appeal decision in Three Rivers No 5 and held that interviews between the employees and RBS’s lawyers in the course of an internal investigation were not covered by legal advice privilege because the employees were not ‘the client’ for privilege purposes. It also confirmed that legal advice privilege did not extend to information provided by employees (current or former) to, or for the purpose of being placed before, a lawyer.
The narrow scope of legal advice privilege requires careful consideration of who the client is at the outset of the investigative process. How information is gathered, the manner in which that information is recorded and by whom should be determined by the answer.
TLT and others v Secretary of State for the Home Department (1) The Home Office (2)
‘De minimis’ level of distress justifies award for misuse of personal data
A spreadsheet containing the personal data of almost 1,600 asylum seekers was accidentally published on the internet. Six of those named brought claims for misuse of private information and breach of the Data Protection Act 1998.
Liability was admitted by the Home Department, so the case turned on the issue of compensation. The judge followed Vidal-Hall v Google, finding that compensation for distress arising from the breach was available. He then considered the threshold for compensation for distress and found that the Claimants must prove a de minimis level of distress to justify an award.
The judge also ruled that compensation may also be available for the family of the individuals named in the spreadsheet provided they too reached the de minimis level of distress required, because their identity and the general area in which they lived could be inferred from the lead asylum applicant named in the spreadsheet.
The Claimants were awarded between £2,500 and £12,500 compensation each. If all 1,600 individuals on the spreadsheet had claimed compensation and received similar awards, the total compensation payable by the Home Department could have been between £4 million and £20 million. If the families had also sought compensation, this figure may have been even higher.
Webster v Burton Hospitals NHS Foundation Trust
Court of Appeal - consent in medical malpractice
In 2015, the ground-breaking decision in Montgomery v Lanarkshire Health Board established that a doctor’s duty, when obtaining a patient’s consent to treatment, was to ensure that the patient had been told of the ‘material’ risks of the treatment. This was to be determined by reference to both an objective reasonable person and the particular patient.
In this case, the Court of Appeal has laid out further guidance on whether the particular patient would have attached significance to a risk of treatment. The Court of Appeal had to consider what would have happened had further ultrasound scanning taken place (at it should have done) in the lead up to the Claimant’s birth. At first instance, applying the Bolam test, the court accepted that the consultant obstetrician’s management plan would not have changed, even if he had performed further ultrasound scans, and the Claimant’s outcome would have been the same – with the case being dismissed accordingly.
On appeal, however, the Court of Appeal affirmed that Bolam was not to apply to issues of consent and that the Claimant’s mother would have placed significance on the increased risks of delaying labour, with the result that an earlier delivery would have taken place and the Claimant would have avoided a hypoxic ischaemic brain injury. In reaching this decision, emphasis was placed upon factors such as the mother’s education, her conduct throughout the treatment and evidence during the litigation (even though this arguably applies hindsight). Further litigation will be required as parties grapple with how these factors are applied to other cases, and explore their limits.
Wilkes v DePuy International Ltd
Artificial hip component not defective
In January 2007, the Claimant underwent a surgical procedure to insert an artificial left hip comprising metal components manufactured by the Defendant. One of these components was a steel femoral shaft called a ‘C-Stem’. In January 2010, that stem fractured, necessitating further surgery.
The court explained that whether a product was acceptably safe involved some balancing of risks and benefits. No medicine or medical device was free from risk and safety was necessarily a relative concept.
The need for such a risk-benefit analysis has long been a matter for debate when applying the Product Liability Directive. The court considered that the failure of the hip was unfortunate, but no evidence was found of any manufacturing or design defect. The fact that a safer design could be envisaged did not mean that the current product was defective. The Defendant manufacturer was therefore not liable. It is anticipated that this first instance decision will be widely welcomed by manufacturers and producers.
X v Kuoni Travel Ltd
Vicarious liability and the responsibility of tour operators
Following the Supreme Court’s decisions in Mohamud v Wm Morrison Supermarkets Plc and Cox v Ministry of Justice in 2016, the High Court considered whether a tour operator should be vicariously liable for the criminal assault of a holidaymaker by an employee of a hotel.
The action of the employee, an electrician who sexually assaulted a guest when he offered to show her a short-cut to reception, was not part of his contractual duties, and the tour operator’s duties did not include its warranting the safety of the guests at all times. The Defendant was not in breach of its duties under the Package Travel, Package Holiday and Package Tour Regulations 1992 and the absence of close connection between the employee’s duties and the attack saw neither the hotel nor tour operator vicariously liable for the actions of the employee.
Zurich Insurance Plc v Maccaferri Ltd
Court of Appeal - interpretation of notification provisions
In September 2011 an incident occurred involving an industrial staple gun hired from the Defendant. The Defendant was required to notify Zurich “as soon as possible after the occurrence of any event likely to give rise to a claim”.
Less than a week later, the Defendant was made aware of the incident and that the gun was being kept for investigation, but little more was known. By January 2012, it was aware that someone had been injured and asked for copies of any HSE investigation reports. By June 2012, it knew solicitors had been instructed to bring a claim and that the gun was being forensically tested. It did not receive a letter of claim until July 2013, at which point it was forwarded straight to the insurers. The insurers declined indemnity on the basis that the Defendant had breached the notification condition precedent.
An ‘event likely to give rise to a claim’ is one that objectively presents at least a 50% chance of a claim being made against the policyholder. The Court of Appeal held here that at the time of the event in September 2011 a claim was not likely, as there was not at least a 50% chance a claim would be made. Further, the wording did not impose on the Defendant an ongoing obligation to re-assess the chances of a claim as the Defendant’s knowledge of the event became more detailed. There was therefore no obligation to notify the insurers of the event when the Defendant had accumulated sufficient information that it knew, or ought to have known, that the accident was likely to give rise to a claim.
If insurers wish to impose an ongoing obligation on policyholders to notify them as soon as it becomes apparent that a previous event might be likely to give rise to a claim, policy conditions will need to be drafted to that effect. Insurers may want to review and revise their notification provisions in light of this decision.