David Hadfield discusses the Court of Apeal decision in Zurich Insurance PLC v Maccaferri Ltd [2016] EWCA Civ 1302

This Court of Appeal decision concerned the interpretation of a claims notification condition in fairly standard terms. The decision underlines the need for insurers to both understand the law and get their drafting right.

Zurich insured Maccaferri under a PL/Products policy against accidental death and personal injury. It contained a condition precedent requiring the insured to give notice in writing to Zurich “as soon as possible after the occurrence of any event likely to give rise to a claim”, which is a wording commonly found in liability policies.

The facts

Maccaferri’s principal business was construction of retaining walls, soil reinforcement and environmental protection. In addition, however, they also supply Spenax guns, which are used to fix securing clips to steel wire mesh cages known as gabions, to the UK construction industry. In September 2011 they hired a gun out to Jewsons who in turn hired it to Drayton Construction. Shortly afterwards an employee of Drayton was injured when the Spenax gun went off accidentally, hitting him in the face and causing serious injury.

Maccaferri was told of that an incident had occurred on 28 September 2012 and asked to take the gun off hire and that it had to be kept for investigation but was not given any details and in particular not told of the injury. By January 2012 M knew that someone had been injured, but no allegation had been made that the gun was faulty. The injured employee issued proceedings against his employer in July 2012 and on 22 July 2012 Maccaferri notified that it had been joined as a part 20 defendant. Maccaferri notified Zurich of the claim on the same day but Zurich refused to indemnify it on the ground that it had failed to comply with the notification condition.

The claim against Zurich

The personal injury claim was settled with Maccaferri contributing to that settlement, and then issuing proceedings against Zurich seeking an indemnity, which claim succeeded at first instance. Zurich appealed and on appeal argued that the condition precedent meant that an insured had to give notice of the event to the insurers when he became aware of it and that it was likely to give rise to a claim, or when he ought to have become so aware. In other words, Zurich was arguing that the condition placed the insured under some sort of continuing duty to keep assessing an event and its likely ramifications.

The Court of Appeal found no real difficulty in dismissing this argument.

In accordance with previous decisions it was accepted that ‘likely’ in this context meant that there was at least a 50% chance of a claim against the insured. Moreover, that assessment had to be made at the time the event occurred or as soon as an insured had knowledge of the event. The words “as soon as possible after the occurrence” related to the time in which notification had to take place and did not, as Zurich argued, impart some continuing duty on an insured to reassess an event.

The court accepted that it was possible to construe the use of the phrase “as soon as possible” in the way Zurich contended, so that an obligation to notify would arise whenever thereafter the insured knew or should have known that an event that had occurred in the past was likely to give rise to a claim; however, it was a strained interpretation and was erroneous.

More importantly, the court said that if Zurich had intended to impose such an obligation they should have said so in clear terms.

The court consequently had to decide whether when the event occurred it was likely to give rise to a claim, which depended on whether, in the light of the actual knowledge Maccaferri then possessed a reasonable person in its position would have thought it at least 50% likely that a claim would be made. The court agreed with the trial judge that this was not the case and dismissed the appeal.

The message to insurers is clear; draft your policies so that they reflect your intentions so that you do not then have to try to do violence to the language to try to get a result.

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