GEORGE HUNT CRANES LTD v SCOTTISH BOILER AND GENERAL INSURANCE CO LTD

An insurance notification clause is a condition precedent to liability where the policy, construed as a whole, clearly provides that no claim is payable unless the clause is complied with. The absence of the expression “condition precedent” is not decisive. A clause expressly stating the consequence of non-compliance may have that effect even though another clause uses the formal label.

The court should give fair effect to clear policy wording while protecting an insured against obscure or ambiguous language. The commercial purpose of timely notification, including prompt investigation while evidence remains available, may confirm the clause’s intended status.

The claimant hired a crane to an insured company. The crane was damaged while in that company’s possession, but the resulting claim was not reported to the defendant insurer within the 30-day period required by the policy. The insured subsequently entered voluntary liquidation, and its policy rights transferred to the claimant under section 1 of the Third Parties (Rights Against Insurers) Act 1930.

His Honour Judge Hegarty QC determined a preliminary issue in the insurer’s favour. He held that compliance with the notification clause was a condition precedent to liability. The claimant appealed, contending that the clause was merely an innominate term whose breach sounded in damages unless sufficiently serious to justify rejecting the claim.

The central issue was whether the words providing that no claim would be payable unless the clause was complied with created a condition precedent to the insurer’s liability.

1. Appeal dismissed unanimously. Potter LJ, with whom Morland J agreed, held that compliance with clause 2(c) was a condition precedent to the insurer’s liability. The final sentence stated in clear and unambiguous terms that no claim was payable unless the clause had been complied with. The insured’s failure to submit the claim within the permitted period therefore barred recovery.

2. An insurance policy must be construed as a whole. Describing a term as a “condition precedent” or “condition of liability” is influential but not invariably decisive. Conversely, the absence of that label does not prevent a term from being a condition precedent where its wording clearly states that consequence. The clause’s language provided the proper starting point and did not operate as a trap based on obscure or ambiguous phraseology.

3. The express use of “condition precedent” in clause 2(b), but not clause 2(c), did not alter the result. Clause 2(c) expressed the same consequence in ordinary language. Its commercial purpose also supported strict compliance. Prompt submission of a claim and supporting information enables an insurer to assess cover and loss, and to investigate while the incident is fresh and evidence remains available.

4. The court derived assistance from Welch v Royal Exchange Assurance [1939] 1 KB 294. That decision treated materially identical words as capable of creating a condition precedent and declined to read “unless” as meaning merely “until”. The additional general wording in that policy did not materially diminish the assistance supplied by the decision.

5. Alfred McAlpine plc v BAI (Run-Off) Ltd [2001] 1 Lloyd's Rep 437 did not support treating clause 2(c) as an innominate term. That case concerned a condition which did not state the consequence of non-compliance, whereas clause 2(c) did so expressly.

6. The insurer’s power to extend the notification period amounted to a power to waive strict compliance. The requirement that an extension be at the insured’s expense supplied additional protection against increased investigation costs; it did not convert the clause into an innominate term. The judgment for the insurer was affirmed, and the appeal was dismissed with costs.

1. Court of Appeal (Civil Division): In [2001] EWCA Civ 1964, the court unanimously dismissed the claimant’s appeal and affirmed the ruling that clause 2(c) was a condition precedent to the insurer’s liability.

2. High Court, Queen's Bench Division, Manchester District Registry: His Honour Judge Hegarty QC decided the preliminary issue on 19 February 2001. He held that the policy required strict compliance with clause 2(c) and gave judgment for the insurer.