The interpretation of the words “as soon as possible” in a notification clause

Nathan Holden, Freeths, Nottingham

Zurich Insurance PLC v Maccaferri Limited [2016] EWCA Civ 1302

Maccaferri Limited (M) was insured by Zurich Insurance PLC (Z), under a policy which required M to give notice to Z as soon as possible after the occurrence of any event likely to give rise to a claim, with full particulars thereof.

In 2011, an employee of a building firm was injured while using a tool hired from M. M was informed of the accident at the time, but was only joined as a party to the litigation in 2013. It immediately notified Z of the claim, but Z refused to indemnify M, on the basis that M had failed to notify Z as soon as possible. The High Court held in favour of M and Z appealed.

Z’s argument was that the effect of the phrase “as soon as possible” meant both that notice had to be given within that period after the event and that the insured had to give notice when it could, with reasonable diligence, have discovered that the event was likely to give rise to a claim i.e. the insured’s duty to notify arose when its state of knowledge was such that it could notify. It argued that this meaning was supported by an obligation to give full particulars, which implied a duty of inquiry.

The appeal was dismissed. It was common ground that “an event likely to give rise to a claim” means an event with at least a 50% chance that a claim would arise. The Court of Appeal concluded that whether there is an obligation to notify an occurrence as one likely to give rise to a claim is to be determined by reference to the position immediately after it occurs. This determination would depend on whether, in the light of the actual knowledge that the insured possessed at the time, a reasonable person in his position would have thought that there was at least a 50% chance that a claim would be made.

When the accident actually occurred, M did not hold enough information to show more than a 50% chance that a claim was likely. The court rejected Z’s argument that “as soon as possible” imposed an ongoing obligation to notify Z when the likelihood of a claim increased to 50% or above. M was not required to make a rolling assessment of the risk of a claim.

In reaching its decision, the Court of Appeal stressed that the notification clause was a condition which had the potential effect of completely excluding liability in respect of an otherwise valid claim for indemnity, so any ambiguity had to be resolved in favour of M.

Comment

Think carefully about the drafting of such notification provisions. What should the trigger be: a particular event; a set of circumstances; the party becoming aware? What is the time frame within which the notice must be given? In this case, it was as soon as possible after an event, where the event was “likely” to give rise to a claim. However, some policies are broader and refer to events which “may” give rise to a claim, in which case notification may be required where there is only a mere possibility of a claim being brought.

The case was useful in giving clarity to the meaning of some common words. For example “an event likely to give rise to a claim” means an event with at least a 50% chance that a claim against the claimant would arise. “Immediately” does not mean instantaneously but “with all reasonable speed considering the circumstances of the case”. The words “as soon as possible” allow more leeway to the insured and do not, as the insurers argued, amount to a requirement “to give notice of any event likely to give rise to a claim, as soon as sufficient information and/or particulars about the likelihood of a claim were to hand, so as to make it both possible and reasonably practical to give such notice”. If that is what the insurer required, then specific drafting should have been included.

Nathan Holden Partner

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