Analyses of: “Likelihood of circumstance giving rise to a claim” and “may give rise to a claim”


The Policy will usually stipulate that the circumstance to be notified is one which is “likely to” or “may” give rise to a claim. The differences in the wording can be significant.


‘Likely’ has deemed to mean:


> at least 50% likelihood of a claim occurring (Layher v Lowe (1996) CA);


> that it is “probable” or “more likely than not” (Laker Vent v Templeton (2009) CA).


‘May’ means:


> ‘at least possible that a claim will result’ (Rothschild v Collyear (1998) QB)


> ‘a real as opposed to a fanciful risk of underwriters having to indemnify insured’ (Aspen v Pectel (2009) QB)


Objective approach to a question of whether a circumstance is something which “might” or is “likely” to lead to a claim (Kidsons).


Points To Consider


> Is it too vague or remote to be reasonably capable of being regarded as a fact or situation which might give rise to a claim


> Would any reasonable person in the insured’s position recognise a real risk of a claim from the facts


> Would different people possessed of same knowledge reasonably form different views as to whether a claim is a real possibility as distinct from a remote risk


2 To whom does a notification have to be made?


3. Is the insured “aware” of the matters giving rise to circumstance at the time of notification that may give rise to a claim? Is it an internal or external trigger?


4. When did the “awareness” arise, and is it attributable to the insured (as a corporate entity, for example)?


5. Has the insured complied with the notification requirement specified in a Policy e.g. time period? Is the obligation a condition precedent?


6. What is the Policy requirement: “likely to” or “may” give rise to a claim? Does the materiality of the circumstance meet this test?


7. How would a reasonable recipient have interpreted the contents of the notification? Is there certainty?


8. If a claim arises has it arisen out of the circumstance notified? Is there sufficient causal connection?


The Facts


> An engineering firm supplied Spenax guns to a builder’s merchant that hired it to a third party building company in 2011.


> An employee of the building company was injured when a Spenax gun went off accidentally. The insured was informed of the incident but, at that time, there was no indication or allegation that the gun had been faulty, nor that anyone had been seriously injured.


In 2012 the injured employee brought a claim against his employer and the insured was notified that it had been joined as a defendant to the proceedings on 22 July 2013. The insured notified Zurich of the claim on the same day. Zurich denied cover on grounds that the insured had failed to comply with the condition precedent relating to notification.


What information should you provide to an insurer:


Unless the policy wording says something different, there is no requirement at the time of notification to identify:


> A specific transaction; > A possible claimant; or


> A potential issue with each transaction


Checklist for consideration of circumstances


1. Form of notification of a circumstance required under a policy of insurance?


Condition Precedents Analysed


In the recent case of Zurich Insurance Plc v Maccaferri Ltd [2016] EWCA Civ 1302 the Court of Appeal was asked to determine the meaning of a condition precedent in an insurance policy which required the insured to notify its insurers “as soon as possible after the occurrence of an event likely to give rise to a claim”.


The Court decided that the insured had an obligation to assess the likelihood of a claim being made immediately after any given incident. The insured was not, however, required continuously to assess whether past events may give rise to a claim.


The Report • June 2018 • Issue 84 | 73


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