Denso Manufacturing UK Ltd v Great Lakes Reinsurance (UK) Plc

Insurance conditions precedent must be construed fairly in the context of the policy as a whole. They are capable of being conditions precedent where their wording and commercial purpose make insurer cooperation and information essential to the risk insured. A clause requiring all costs-related communications to be forwarded without delay is not limited to material information and requires prompt transmission. Under the Third Parties (Rights Against Insurers) Act 1930, a statutory assignee takes subject to policy defences available against the insured. A liability indemnity does not accrue until the insured’s liability has been established and quantified. Premium is not a condition precedent merely because the policy makes it payable after the insured event.

Denso claimed against Great Lakes as statutory assignee of Mploy Group Ltd under section 1 of the Third Parties (Rights Against Insurers) Act 1930. The claim concerned an after-the-event policy covering adverse costs arising from earlier litigation between Mploy and Denso.

Great Lakes relied on alleged breaches of policy conditions, non-payment of premium and policy exclusions. The principal issue was whether Mploy or its agents had breached conditions precedent by delaying or failing to forward offers, costs correspondence and notice of detailed assessment proceedings. The court also considered when Denso’s rights accrued, the construction of the policy’s success provisions, premium, exclusions and set-off.

1. Conditions precedent. The policy wording and its commercial context made Conditions 7, 9 and 11 capable of operating as conditions precedent. The insurer’s exposure was centrally concerned with adverse costs, and the policy depended on the insured’s cooperation and provision of information. The approach in Re Bradley and Essex and Suffolk Accident Indemnity Society was distinguishable because the relevant commercial purpose was absent there. The modern approach required fair construction, not an artificial refusal to give effect to the words used.
2. Condition 11(c). The obligation to forward all bills or other communications relating to fees or costs without delay was not qualified by a request from the insurer and was not confined to material information. Mploy’s agents breached it by delaying transmission of the December 2014 offer, the March and July 2015 correspondence and the August 2015 notice of detailed assessment. The January 2015 communication from Great Lakes did not waive or elect against the condition.
3. Accrual of rights. Under the Third Parties (Rights Against Insurers) Act 1930, Denso’s rights were subject to defences available against Mploy. The right to indemnity accrued only when the insured liability was established and quantified. It therefore accrued after the default costs certificate, so the breaches occurred within the temporal scope of the conditions.
4. Alternative issues. The policy’s success wording was construed broadly. The proceedings were at least partially successful, and Great Lakes had waived the requirement for written approval to reject the Part 36 offer. Premium payment was not a condition precedent: the policy contained no such wording or fixed payment date. The insurer also failed to establish the exclusions based on other insurance or unpaid sums, although the mitigation exclusion would have applied if necessary.
5. Set-off. The court preferred Murray v Legal & General Assurance Society to the contrary obiter observation in Cox v Bankside Members Agency Ltd. The 1930 Act transferred rights in respect of the insured’s liability to the third party, not the insured’s separate liability for premium. Any equitable set-off also required proof of manifest injustice, which was absent. The claim therefore failed.