The court’s findings


The Court of Appeal rejected Zurich’s interpretation of the condition precedent.


If it had


been upheld the potential effect would have been to exclude liability for an otherwise valid claim for indemnity.


The Court determined that the phrase “an event likely


to give rise to a claim” meant an event with at least a 50% chance of leading to a claim. The fact that a claim was possible was not enough.


The impact of the words “as soon as possible” were the considered in the context of the drafted clause.


The words “as soon as possible after the occurrence of an event” could, in theory, mean that an insured was under an obligation to continuously assess whether past events were likely to give rise to litigation. The Court would not apply this strained interpretation of the wording unless insurers had spelt it out.


The test applied: At the time that the event


occurred – was it likely (i.e. a likelihood of 50% or more) to give rise to a claim and it was decided that the ‘likelihood’ of a claim could not be inferred simply from the fact that an accident/event had occurred.


It was found that on the facts of this case, particularly due to the insured’s lack of knowledge as to what had happened, there was no such likelihood as at the time of the incident, the insured did not know that anyone had been seriously injured and there was no indication that the gun had been at fault. During the proceedings two of the instructed experts could find nothing wrong with the gun; there were no grounds for Zurich to deny liability.


Factors considered:


1. the insured knew very little of what had happened at the time of the incident;


2. there were limited grounds for alleging that the insured’s product was faulty; and significantly


3. the allegation of fault was not even made until a year after proceedings were first issued.


On the facts of this case, the Court found that it would be unreasonable to expect an insured to carry out a “rolling assessment” of whether past events were likely to give rise to a claim.


If you are interested in discussing any of the content of this article we will be pleased to do so as independent insurance intermediary that specialises in arranging insurance for the marine industry.


Karen Brain Managing Director


Matrix Insurance Services Ltd Tel: 01892 724060


Enquiries @matrix-ins.co.uk 74 | The Report • June 2018 • Issue 84


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