Trap for The Unwary #24,534

"Life is just one damn thing after another" (Elbert Hubbard).

Nearly every insurance contract has a term ("the notification term"or "NT") which obliges the policyholder to promptly notify the insurer once there is even the possibility of a claim arising. It will usually read something like this:

The Assured shall give immediate notice in writing, with full particulars, of the happening of any occurrence likely to give rise to a claim

Such a straightforward sentence, one might think. And the requirement is not unreasonable:

The authorities concerning such clauses recognise that the purpose of [an NT] is twofold. First, it is intended to enable insurers to investigate potential claims at the earliest possible opportunity, before the trail of evidence goes cold, and to take, or require the assured to take, such steps as insurers think appropriate to minimise liability under the policy; see e.g. Pioneer Concrete (U.K.) Ltd v National Employers Mutual General Insurance Association Ltd [1985] 1 Lloyd's Rep 274 at 278, per Bingham J; Rothschild Assurance at 22, per Rix J; Friends Provident at paragraph 20, per Moore-Bick J; McAlpine v BAI [1998] 2 Lloyd's Rep 694 at 698, per Colman J; Clarke, The Law of Insurance Contracts, paragraph 17-4D4

(The quotation is from HLB Kidsons (A Firm) v Lloyds [2007] EWHC 1951 (Comm)[2007] which, on what has been my first reading, appears to be a model of clear judicial exposition. Take a bow, Gloster J.!)

However, human nature being what it is, and life being as Elbert Hubbard described, problems arise. In practice, the NT is, or is becoming, yet another hurdle at which policyholders with otherwise valid claims can fall.

In Layher, for example, the issue was how prompt did "immediate" notification have to be. The insurer argued that the notification should have taken place no later than 26th January 1990, even though accepting that the policyholder - a manufacturer of scaffolding components - did not have any knowledge of the incident (an alleged failure of scaffolding) giving rise to the claim at that date. I was reminded of Monty Python's Four Yorkshiremen, one of whom boasted that, in his impoverished youth, his routine obliged him to get up half an hour before he went to bed.

Other difficulties which have arisen with the NT have been whether a notification qualified to be described as such at all, whether one delivered to a branch of the insurer, or to an agent of the insurer, was effective, and whether an occurrence should really have been recognised as likely to give rise to claim (as in Coster).

In the latest case(a grateful hat-tip once more to Cameron McKenna ), a builder ("Kajima")did send a notification in what appeared to be good time, but it was deemed not to have been sufficiently detailed and only part of the builder's claim under the policy was successful.

Akenhead J., of the London High Court, sets out the opposing contentions thus:

In summary, the Claimant's case is that the investigation referred to in the notification led in time (after expiry of the insurance) to further investigations both by JRF's consultants and Kajima's own. Over the years which followed further defects and deficiencies were uncovered resulting in the discovery finally of defects which brought about the final settlement with JRF. Mr Williamson QC for Kajima effectively said that there was a "continuum" from 2001 onwards and the losses, costs and liabilities incurred by Kajima all in effect therefore arose from the notified circumstances. He argued that it mattered not that the defects uncovered as time went on were different from those which were or which gave rise to the specific notified circumstances. In the alternative, he argued upon a narrow basis that at the very least Kajima would be entitled to those losses which were attributable to the specifically notified circumstances.

Mr Catchpole QC and Miss Ansell for TUIC argued that the notified circumstances were relatively narrow. The 'investigation' referred to in the notification was clearly intended to be an investigation into the notified circumstances as opposed to some general investigation into the possible existence of other defects. They argued that the coincidental later discovery of other defects or damage had nothing to do with the originally notified circumstances directly and was not covered by the notification; alternatively such defects or damage and any claim arising from them did not arise from the notified circumstances.

While this was a case with what appear to me to be an unusual set of facts, it does seem odd that a policyholder might lose its cover through a failure, not to notify, but to draft its notification carefully enough.