The Court of Appeal has ruled that a clause requiring the policyholder to “give notice in writing to the insurer as soon as possible after the occurrence of any event likely to give rise to a claim" only required the policyholder to carry out an assessment of the likelihood of a claim at the time of the event. There was no requirement to carry out a rolling assessment of the likelihood of a claim as time went on.
The facts
Maccaferri Limited is the UK supplier of Spenax pneumatic lacing guns. In September 2011 one of the guns malfunctioned, seriously injuring a worker. Maccaferri were told that there had been "an incident" but were not aware of any details at the time. Maccaferri only found out that they were involved in a claim in July 2013, at which point they informed their insurer, Zurich, immediately. Zurich refused to cover the claim as they argued that they should have been notified much earlier.
The clause
Zurich asserted that Maccaferri had not complied with a condition of the policy which required that:
“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 interpretation
The court ruled that the words "as soon as possible" referred only to the promptness with which a notice had to be given under the clause, and that notice only had to be given once there had been an “event likely to give rise to a claim”.
It had already been established that “likely to give rise to a claim” means that there must have been at least a 50% chance that a claim would be made. Therefore, if at the time of the event the likelihood of a claim was not more than 50%, there was no obligation to notify.
The clause did not require the policyholder to carry out any kind of "rolling assessment" to actively investigate whether a past event was now likely to result in a claim, and to notify “as soon as possible” on discovering that it was. If an insurer wanted to put the policyholder under this kind of obligation then it would have to be explicitly stated in the policy. Clauses to this effect are common features of claims made policies (as is frequently used in professional indemnity insurance) but there was no such wording in this policy.
Advice for policyholders
This is a welcome decision for policyholders. However, it is important that policyholders are aware of the notification provisions in their policies and understand exactly what they require. Some key issues to be aware of are:
- What level of likelihood does your clause require? “May give rise to a claim” means more than a mere possibility and is easily triggered. “Likely to give rise to a claim” means more than 50% and is harder to trigger.
- Is your clause triggered by the knowledge of a specific person within your organisation?
- Do you have procedures in place for reporting incidents and assessing their seriousness?
- Does your clause require the notice to be in a particular form and contain certain information?
For further information on these issues please contact Matthew Walker from our insurance team.