JACOBS v COSTER (T/A NEWINGTON COMMERCIALS SERVICE STATION) AND AVON INSURANCE (THIRD PARTY)

Under an insurance condition requiring immediate notification of an event likely to give rise to a claim, likely means at least a 50 per cent chance of a claim. The issue is assessed objectively at the time of the event, while taking account of the insured’s knowledge.

The insurer bears the burden of proving that threshold. A subsequent claim does not itself establish that it was likely when the event occurred. Nor does a serious injury requiring ambulance removal, without evidence of a defect, blame, or other indication of liability, establish the required probability.

The insured operated a petrol filling station and vehicle sales lot under a combined all-risks policy. Its general condition 5a required immediate reporting of an event giving, or likely to give, rise to a claim. Condition 8 made compliance with that condition precedent to the insurer’s liability.

A customer fell on the forecourt, sustained a serious leg or ankle injury, and was taken to hospital. The insured did not notify the insurer until solicitors later intimated a claim. The claim was compromised, but the insurer reserved its position and denied indemnity. The Medway County Court held that the accident was likely to give rise to a claim. The insured appealed.

1. Appeal allowed. Laws LJ, with whom Robert Walker LJ agreed, held that the county court had been wrong to find a breach of the notification condition. The insurer was required to indemnify the insured in respect of the customer’s claim.

2. The court proceeded on the basis that breach of condition 5a would permit avoidance under condition 8; that condition 5a was to be construed objectively while taking account of the insured’s knowledge; and that later prompt notice of an actual claim could not cure an earlier breach.

3. Following the approach in Layher Limited v David Richard Lowe, The Times 8 January 1997, the insurer bore the burden of proving that, immediately after the incident, a claim was at least 50 per cent likely. The fact that a claim was subsequently brought could not by itself establish that probability.

4. The evidence did not show that the insured knew of a defect on the forecourt or had been blamed for the accident. The trial judge was to be taken as having accepted that the insured and his wife inspected the forecourt and saw nothing wrong. A serious but unexplained injury, even one requiring removal by ambulance, did not without more demonstrate a probability exceeding 50 per cent that a legal claim would be made.

5. The trial judge had impermissibly inferred the likelihood of a claim from the occurrence of the accident itself. The insurer therefore could not avoid liability. Costs were awarded to the insured both in the Court of Appeal and below.

• Court of Appeal (Civil Division): Allowed the insured’s appeal and held that the insurer must indemnify him in respect of the customer’s claim.
• Medway County Court: On 29 July 1998, His Honour Judge Hargrove QC held in third-party proceedings that the insurer could avoid liability under the policy.