Zurich Insurance Plc v Maccaferri Ltd

A notification condition requiring notice as soon as possible after an event likely to give rise to a claim is assessed by reference to the event when it occurred, not by a later development making a claim likely. The condition cannot require notice of an event unknown to the insured. The question is whether, on the facts actually known to the insured at the time, a reasonable person in the insured’s position would have considered it at least 50% likely that a claim would be made. The insured’s subjective view is not decisive. Where wording is ambiguous and could wholly exclude an otherwise valid indemnity, the insurer must have used clear language; ambiguity is resolved in favour of the insured.

Maccaferri hired a pneumatic lacing tool to a chain of construction businesses. An employee of the ultimate hirer suffered a severe eye injury when a clip was allegedly ejected from the tool. Maccaferri was later joined to contribution proceedings and notified Zurich, which declined indemnity under a policy condition requiring notification of events likely to give rise to a claim.

Knowles J held that the condition was not engaged because, when the accident occurred, it was not sufficiently likely that a claim would be made against Maccaferri. Zurich appealed, arguing that the notification obligation arose when Maccaferri later knew, or ought to have known, that the earlier event was likely to generate a claim. The central issue was the proper construction and application of the notification condition.

Appeal dismissed. Zurich was not entitled to rely on Clause 2 to deny indemnity.

1. The first sentence of Clause 2 concerns an event occurring at a particular time, place and in a particular way. Whether it was likely to give rise to a claim is assessed by reference to the position when the event occurred. The court applied the approach reflected in Axa Reinsurance (UK) Plc v Field [1996] 1 WLR 1026, Layher Ltd v Lowe [2000] Lloyd's IR 510 and Jacobs v Coster [2000] Lloyd's Rep IR 506.
2. The phrase as soon as possible governs the time for notification. It does not create a rolling obligation to reassess whether a past event has become likely to give rise to a claim. Zurich’s construction was strained, and the policy could have used clearer wording if that result was intended.
3. The condition cannot require notification of an event unknown to the insured. The relevant likelihood is assessed on the facts actually known to the insured, but objectively by reference to what a reasonable person in the insured’s position would have thought. The reasoning in HLB Kidsons & Ors v Lloyd’s Underwriters [2009] EWCA Civ 1205 supported that approach. Verelst’s Administratrix v Motor Union Insurance Company Limited [1925] 2 KB 137 was distinguishable because it concerned the time for notification after the relevant event and its existence were already known.
4. Because the condition was introduced by the insurer and could wholly exclude an otherwise valid indemnity, any ambiguity had to be resolved in favour of Maccaferri. This was consistent with Royal and Sun Alliance v Dornoch [2005] EWCA Civ 238.
5. Knowles J was entitled to find that, on the facts known at the time, there was no 50% likelihood of a claim against Maccaferri. The accident’s seriousness did not itself establish that likelihood, and fault in the gun was only one of several possibilities. Zurich therefore could not rely on the condition. The court did not need to determine the alternative reasonable-diligence issue.

• Court of Appeal (Civil Division) — Appeal from the Commercial Court dismissed on 12 January 2017 under [2016] EWCA Civ 1302.
• High Court, QBD, Commercial Court — Knowles J held that the notification condition was not engaged and that Zurich could not rely on it to deny indemnity. The lower-court citation was not stated in the judgment.