LAYHER LTD v LOWE

An immediate-notice insurance condition requires the likelihood of a claim to be assessed by reference to the circumstances immediately following the relevant occurrence. A claim made later does not itself establish that it was then likely.

Likely means at least a 50 per cent chance. A possibility of claims in a litigious context is insufficient. Later information cannot cause the original event to become an occurrence likely to give rise to a claim at a later date where no further occurrence has taken place.

A storm blew a temporary roof from scaffolding at Upark Manor House, causing deaths and substantial damage. Layher Ltd had supplied components for the roof and was insured under a liability policy containing an immediate-notice claims-procedure condition.

Layher later notified insurers of a possible claim and of proceedings, but did not give immediate notice of the storm. The underwriters denied cover for Layher's litigation costs, contending that the storm was an occurrence likely to give rise to a claim.

Judge Thornton QC held that the condition was precedent to liability, but that the incident was not an occurrence likely to give rise to a claim. The underwriters appealed that final holding. The central issue was whether the circumstances immediately after the storm made a claim against Layher likely.

1. Appeal dismissed unanimously. Saville LJ gave the judgment, with which Brooke and Nourse LJJ agreed. The underwriters had not established that the storm was an occurrence likely to give rise to a claim under the policy.

2. The court assumed, without deciding, that the notification provision imposed an objective test irrespective of the insured's actual or constructive knowledge. Even on that assumption, the required assessment had to be made by reference to the state of affairs immediately after the incident, because the condition required immediate notice.

3. The fact that a claim was made two years later did not show that it had been likely immediately after the accident. The word likely required at least a 50 per cent chance, not a mere possibility.

4. At the material time Layher had supplied components only. There was no material showing that a defect in those components, including the securing wedges, had caused the accident. Claims against Layher may have been possible, but they were not likely.

5. The underwriters' alternative argument also failed. Subsequent facts could not make the January incident an occurrence likely to give rise to a claim at a later date, since there had been no later occurrence. It was therefore unnecessary to decide either the knowledge issue or Layher's contention that the condition was not precedent to liability.

• Court of Appeal (Civil Division): In [1996] EWCA Civ 1231, the court dismissed the underwriters' appeal.
• High Court, Queen's Bench Division, Official Referees Business: Judge Thornton QC held that the notification condition was precedent to liability and that another insured's notice could not assist Layher, but found that the storm was not an occurrence likely to give rise to a claim.