In most public liability insurance policies there is a duty on the insured to notify the insurer of any event which is likely to give rise to a claim “as soon as possible”. But what do those words actually mean? That was the issue which the Court of Appeal had to consider in the case of Zurich Insurance Plc v Maccaferri Limited, a case which was decided at the beginning of this year.
Maccaferri was an engineering firm which supplied staple guns to the construction industry. It supplied those guns to a builder’s merchant which, in turn, hired them out to a building company.
In September 2011, an employee of the building company was injured when a gun went off accidentally. Maccaferri was informed of the incident and at the time there was no allegation that the gun had been faulty or that anyone had been injured. The injured employee subsequently brought a claim against his employer in July 2012 and Maccaferri was notified that it had been joined as a Defendant to those proceedings on 22 July 2013. Maccaferri notified its insurer, Zurich, of the claim on the same day. The personal injury claim was eventually settled with Maccaferri agreeing to pay a contribution of £233,333. Maccaferri sought an indemnity from Zurich under its insurance policy.
However, Zurich refused to pay on the basis that Maccaferri had acted in breach of the policy by not providing notice in writing “as soon as possible after the occurrence of any event likely to give rise to a claim”. Zurich contended that this condition meant that Maccaferri should have given them notice of the event as soon as it became aware the incident rather than on the 22 July 2013.
However, the Court of Appeal disagreed and upheld the decision of the lower court that the clause in question required a reasonable assessment by the insured at the time of the “event” as to whether it was likely to give rise to a claim and did not, as Zurich had submitted, impose an obligation on the insured to “carry out something of a rolling assessment, as circumstances develop, as to whether a past event is likely to give rise to a claim”. The Court found that “an event likely to give rise to a claim” meant an event with at least a 50% chance that a claim would arise.
The Appeal Judges found that the phrase “as soon as possible” within the policy did not mean that there was an obligation on the insured to notify the insurer whenever the insured knew or should have known that an event which had occurred in the past was likely to give rise to a claim. If the insurer wanted to impose such a requirement then it had to be clearly spelt out in the policy. The wording in Zurich’s policy was ambiguous and any ambiguity would be resolved in favour of the insured.
Although this decision was decided in favour of the insured, it would be good practice for policyholders to notify their insurers of any claim or potential claim as soon as they become aware of it so as prevent the insurer from raising the issue of none or late notification as a ground for voiding the policy.
If you are involved in any contract dispute or require advice on the interpretation, clarification or drafting of contract terms then Blacks Solicitors LLP can assist. Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.