Many liability policies require the insured to give prompt notice of any loss or circumstance that may give rise to a claim on the policy. Notification is a complex area and the stakes for both sides are high.
For the insured, non-compliance can prove fatal to its prospects of recovery. But it can be difficult to ascertain what should be notified and when, whether there is a duty of enquiry and, if so, for how long. For the insurer, notification clauses are intended to give them an early opportunity to investigate the circumstances surrounding the event giving rise to the claim, defend the insured proactively if a claim has been made against them, set up a reserve and shorten the tail of their exposure. The insurer’s challenge is to give proper thought to what it really wants to know and when – and to articulate that in a wording intended to cover numerous different factual scenarios.
The Court of Appeal decision in Zurich Insurance v Maccaferri is the latest in a long line of cases that show it is difficult to strike the right balance. In this case the insured was made aware of an accident involving equipment that it supplied. At that time there was no suggestion of a claim against the insured or that the equipment might have been faulty. The accident did not, therefore, require notification as a circumstance that may give rise to a claim under the insured’s policy. The Court held that the wording of the policy did not impose any obligation on the insured to continue to monitor the situation thereafter to see if the circumstances changed such that a notification was required.
The slew of cases in recent years (HLB Kidsons v Lloyd’s Underwriters being the most noteworthy) illustrate that notification remains a problematic issue, exacerbated by the fact that insurers do not always give sufficient thought to what they need to know and may be too content to rely on standard wordings which are not clearly drafted. Just as is now happening in the context of the Insurance Act 2015 and the new pre-contractual duty to make a “fair presentation”, it is time for insureds and insurers to work more closely together to exchange relevant information and discuss each other’s requirements. That way, the insured will be at less risk of losing its right to indemnity for breach of a notification provision and the insurer will have access to the right information at the right time to enable it to make an informed decision on the merits of the claim.