Daniel Makin v The Restaurant Muse Limited & Ors

Insurance notification clauses are construed by their wording and context. A clause requiring notification of circumstances which may give rise to a claim can be triggered when the insured acquires relevant knowledge after the incident, including knowledge that employees are being investigated for allegedly injuring a customer. A clause stating that breach of claims conditions will entitle the insurer to refuse the claim may create a condition precedent even though it does not use those words, where the conditional link is clear. A genuine ambiguity is required before contra proferentem construction applies. If the clause instead confers a contractual discretion, it must be exercised lawfully, rationally, in good faith and consistently with its purpose. Under the Third Parties (Rights Against Insurers) Act 2010, an earlier judgment establishing the insured’s liability is binding on the insurer as to the issues it determined.

The claimant suffered serious neurological injury after being restrained by door supervisors employed by the Second Defendant. In earlier proceedings, HHJ Sephton KC found that the assault caused the injury and that the Second Defendant was vicariously liable. The First Defendant was the premises operator and the Third Defendant was the Second Defendant’s public liability insurer.

The claimant proceeded against the insurer under the Third Parties (Rights Against Insurers) Act 2010. The insurer accepted that the policy could respond but relied on failures to notify the incident and claims, under Claims Conditions 2 and 3.5. The issues were whether those conditions were breached, whether they were conditions precedent or conferred a discretion, whether any discretion was properly exercised, and whether the earlier judgment bound the insurer.

1. Notification under Claims Condition 3.5. At the time of the incident and its immediate aftermath, no reasonable insured would have concluded that circumstances existed which might give rise to a claim. The obligation arose later, however, when the Second Defendant’s controlling mind knew, or ought reasonably to have known, that the police were investigating an incident in which its door staff were alleged to have injured a customer. The failure to notify within 30 days was a breach. Zurich Insurance plc v Maccaferri Ltd was materially different because it concerned a higher threshold of circumstances likely to give rise to a claim; Aspen v Pectel Ltd was the closer analogy.
2. Claims Condition 2. The clause was construed as requiring documents relating to an accident, incident or occurrence which might give rise to a claim to be sent unanswered to the insurer. Although grammatically possible alternatives were identified, they made no sense, so there was no genuine ambiguity requiring contra proferentem construction. The letter forwarded by the premises operator in December 2019 and the letter of claim received in June 2020 both triggered the obligation. The latter was not forwarded immediately.
3. Effect of breach. The words that breach “will entitle” the insurer to refuse to deal with the claim created a clear conditional link between compliance and liability. Claims Conditions 2 and 3.5 were therefore conditions precedent, entitling the insurer as of right to refuse indemnity. The court’s observations on a possible contractual discretion were alternative and academic. Had such a discretion existed, it would have been subject to Braganza principles. The insurer had shown a real chance of prejudice from faded memories and unavailable door staff, but its actual decision had not been shown to be a discretionary Braganza decision.
4. Earlier judgment. Following Scotland Gas Networks plc v QBE UK Ltd, the earlier judgment established the insured’s liability for breach of duty, vicarious liability and primary causation under section 1 of the 2010 Act. The insurer could not reopen those issues, although the claim nevertheless failed because of the notification breaches.
5. Disposition. The Third Defendant was not liable to the claimant under the 2010 Act. The claim against it failed. The parties were invited to agree the consequential order.