(Re)insurance Weekly Update 02- 2017

This Week's Caselaw

Maccaferri v Zurich Insurance: Court of Appeal construes a notification CP requiring notice "as soon as possible"

http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWCA/Civ/2016/1302.html&query=title+(+maccaferri+)&method=boolean

The first instance decision in this case was reported in Weekly Update 23/15. A worker was seriously injured using a tool which had been hired by the claimant insured (via a builders' merchant). The insured did not give notice to its insurer until the builders' merchant issued Part 20 proceedings against it, almost 2 years after the accident.

The notification condition precedent in the policy required notification "as soon as possible after the occurrence of any event likely to give rise to a claim". The insurer argued that this required the insured to give notice when it becomes aware of an event that is likely to give rise to a claim, or when it ought to have become so aware. In other words, the insured had to be pro-active in making inquiries. That argument was rejected by the judge at first instance and the Court of Appeal has now dismissed the appeal from that decision.

The Court of Appeal noted that the effect of a breach of the CP here would be to completely exclude liability for an otherwise valid claim. As such, the insurer had to use clear wording. The Court of Appeal did accept that it was possible to construe "as soon as possible" as not just specifying the time for notification but also requiring notification 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. However, it concluded that such an interpretation would be "strained" and "erroneous", and any ambiguity had to be resolved in favour of the insured. Any requirement to carry out something of a "rolling assessment" of a past event would have to be clearly spelt out in the CP.

On the facts of the case, the insured had not been aware, when the accident occurred (an occasion not limited to the exact moment of the accident), that there was at least a 50% chance that a claim against it would eventuate. The insured had not been blamed at the time, and the seriousness of the accident did not increase the likelihood of an allegation against the insured. A faulty tool was a possibility, but just one of many other possibilities.

Accordingly, the insurer could not rely upon a breach of the CP to deny liability.

In any event, even if the CP had required "reasonable diligence" by the insured, it had sufficed that the insured had asked for information from those to whom the tool had been hired (even though there had been no response). The insured did not need to press for information when no blame was being directed against it at the time.

Channon v Ward: Assessment of damages in a broker negligence case where insurance policy was not placed

http://www.bailii.org/ew/cases/EWCA/Civ/2017/13.html

Judgment in default was obtained against an insurance broker who had negligently failed to obtain indemnity insurance for the claimant. However, the judge assessed damages at nil, on the basis that the insurers would have been able to rely on two exclusions in the policy and/or would have found that the claims did not arise out of the claimant's conduct of his insured business as a chartered accountant (in so doing, the judge rejected an argument that the insurer would not have wanted a reputation for refusing indemnity).

On appeal, the claimant sought to argue that there was a significant prospect that the insurers would have sought and received legal advice which would have caused them to take a different course. The Court of Appeal held that the insurers would not have taken legal advice: "It has to be remembered that insurers, not unnaturally, can be very influenced by what they perceive to be the flavour of the case... In these circumstances the attempt to persuade this court that the insurers would probably have taken legal advice was in my view forlorn. They might have done, but that is speculation. The claim stank, and in the view of their own insured it was a contrivance". Furthermore, the QC clause in the policy did not assist the claimant: the role of the QC does not extend to resolving disputes as to the scope of cover. It is instead limited to deciding whether, in the event that cover is accepted, the insurers can require their insured to defend a third party claim: "The reason for this is obvious. Professional men ought not to be required to defend claims in circumstances where no defence can conscientiously be advanced".

(The Court...