In the recent case of Zurich Insurance plc v Maccaferri Limited [2016] EWCA Civ 1302 the Court of Appeal ("CoA") considered the meaning of a notification provision in a combined public and products liability insurance policy.

The relevant clause, which was a condition precedent, required the policyholder Maccaferri Limited (Maccaferri) to notify Zurich Insurance plc (Zurich):

"as soon as possible after the occurrence of any event likely to give rise to             a claim" (the Clause)

The High Court had found that Zurich was not entitled to reject the claim for late notification because Maccaferri did not have sufficient information to trigger the duty to notify.  In a decision that comes as good news to policyholders, the CoA endorsed this view, rejecting Zurich's much stricter interpretation of the Clause.

The CoA also agreed with the High Court that the determination of the condition precedent should be made with reference to the position immediately after the event had occurred, rather than through a continued assessment of the event.

Facts

Maccaferri was a supplier of 'spenax' guns which are used in the construction industry. Macaferri supplied the guns to a builder's merchant who subsequently hired the guns to a building company.

In September 2011, an employee of the building company was injured when a faulty spenax gun went off accidentally, causing a severe injury to his right eye. Macaferri was notified by the building company that there had been an incident with the gun and that the building company wanted to take the gun off hire. At that time, Macaferri was not given any other details and it was not notified that there was a serious personal injury or that this could have been caused by a fault with the spenax gun.

In January 2012, Macaferri found out that someone had been injured during the incident, but there was still no indication that this was as a result of a fault with the spenax gun. The injured employee subsequently commenced proceedings against the building company in July 2012.

Macaferri was later informed that it had been joined as a part 20 defendant to the proceedings on 22 July 2013. Macaferri notified Zurich of the claim on the same day. However, Zurich refused to pay the insurance on the basis that Macaferri should have notified them earlier.

 

Decision

The CoA held that Zurich's interpretation of the Clause would have the effect of discharging it from liability for what would otherwise be a legitimate claim. It would also burden Maccaferri with a 'rolling obligation' to assess whether a past event was likely to give rise to a claim.

The CoA also found that the wording of the policy was not precise enough to exclude Zurich's liability. It was ambiguous and should therefore be interpreted in favour of the policyholder.

By following Layher Ltd 58 Con. L.R. 42 and Jacobs [2000] Lloyd's Rep I.R. 506, the CA held that "an event likely to give rise to a claim" should be interpreted to mean an event that may have at least a 50% chance of triggering a claim.

The CoA also held that the wording "as soon as possible" should be construed to mean that the obligation to notify would arise whenever the insurer knew, or should have known, that an event which had occurred in the past is likely to give rise to a claim.

The question before the CoA was therefore whether when Macaferri was first made aware that an incident had occurred, it would or should have thought it 50% likely that the incident described would result in a claim.

The CoA held that because the details of the incident were not particularly clear and because at the time of notification: (i) Maccaferri was unaware that someone had been seriously injured; and (ii) it was not clear that the gun was at fault, Maccaferri could not have reasonably concluded that there was more than a 50% chance of a claim transpiring as a result.

Commentary

This decision provides guidance to policyholders on when their duty to notify is triggered under a notification clause that requires notification "as soon as possible after the occurrence of any event likely to give rise to a claim". Following an event, they should consider whether, on balance, there is at least a 50% likelihood that the event could result in claim. Once they have done this, there is no need to consider whether the past event is likely to give rise to a claim on a rolling basis.

However, this was a clause requiring notification of a claim and it is very much based on the specific wording of the policy. Great care must be taken around notification provisions, especially when they relate to circumstances, which may require notification at a much earlier stage.

Finally, the CoA's judgment provides a useful reminder that insurers cannot rely on ambiguous policy wording to escape liability under a policy.