Loyaltrend Ltd & Anor v Creechurch Dedicated Ltd & Ors

An insured seeking business interruption indemnity must establish both insured material damage and compliance with any policy condition precedent requiring immediate notification. The notification question is objective: the court asks whether the circumstances involved damage in consequence of which a claim might be made, rather than what the insured subjectively understood. Where progressive subsidence causes damage across successive policy periods, liability depends on proving when the relevant material damage occurred and linking the business interruption loss to that damage. Failure to give timely notice is sufficient to defeat the claim.

Loyaltrend operated a clothing shop affected by progressive subsidence, cracking and water ingress. It claimed material damage and business interruption losses under successive policies, pursuing only Brit, whose policy covered 11 December 2003 to 10 December 2004. Brit argued that significant damage had occurred before its policy began and that the claimants had failed to give immediate notice as required by the policy.

The court heard factual and expert evidence concerning the timing of the subsidence, material damage, notification and resulting trading losses. The central issues were whether insured material damage occurred during Brit’s policy period, whether timely notice had been given, and whether the claimed business interruption losses resulted from that damage.

1. Judgment for the defendants. The claim failed because the claimants did not comply with the policy’s condition precedent requiring immediate notice of injury or damage in consequence of which a claim was or might be made.
2. The notification obligation imposed an objective test. The question was not what the insured subjectively appreciated, but whether the circumstances objectively required notification. The significant internal cracking apparent by November 2003 was sufficiently serious to require notice, even though the witnesses perceived a further “step change” in October 2004. The court applied the approach identified in Laker Vent Engineering Limited v Templeton Insurance Limited [2009] EWCA Civ 62.
3. The court rejected the alleged notifications in August and November 2004. The evidence of the broker was unreliable, and the contemporaneous documents did not support notification at either time. The claimants’ earlier accounts placed notification in August 2005.
4. It was therefore unnecessary to decide the remaining issues. Nevertheless, the court considered that the policy covered business interruption only where it resulted from insured material damage, not directly from subsidence. The evidence suggested that some material damage occurred during Brit’s policy year, but that most of the relevant damage and interruption occurred in 2005 and after.
5. The court also expressed provisional conclusions that the evidence could not reliably allocate the losses to Brit’s policy period and that the denial of access argument could not succeed on the wording of the extension. No final decision was made on the separate condition concerning admissions, offers or promises, because it was unnecessary.