#4922 - Claims - Insurance Law

Claims

What is an Insurance Claim?

‘Insurance Claim’: A claim is essentially derivative of an insured loss that falls within the subject matter of the insurance policy. You cannot claim for a loss unless a loss has been suffered – when an insured suffers an insured loss it has claim against insurers clear link – when you interpret policy conditions in connection with claims, the conditions must be interpreted in the context of the particular loss to which they relate.

The following must precede an insurance claim:

1. Tangible property – Total or partial loss.

2. Intangible property – Loss of a contractual right.

3. Liability – Determination of liability and of quantum. But also must bring to UWs’ attention circumstances likely to give rise to a claim, as soon as they come to the insured’s attention – notify.

-------------------------------------------------------------------------------------------------------------------------------------

Notification Requirements Implied at Law?

No positive duty on an insured at law to keep an UW advised / notify them of a claim. In the absence of an express contractual term the insured only has to prove loss and comply with CPRs, after bringing loss to insurer’s attention.

-------------------------------------------------------------------------------------------------------------------------------------

Contractual Terms as to Notification of Claims

Policy Terms: Actual obligation on an insured as to the notification of a claim to UWs is determined by policy terms. These constitute a trigger for the claim obligation in first place, shape and dictate form / content of the obligation to notify and set out the effect of the breach.

Triggers for Claim Obligation: Important as this sets off the start of the period:

1. Bring to UWs’ attention circumstances ‘likely to give rise to a claim’ – Must be notified as soon as they come to the attention of the insured.

Refers to circumstances which may occur prior to loss. Important in context of liability insurance where loss is not ascertained until liability is proved, but UWs will want to know before that.

‘Likely’ implies must be more than a 50% chance; i.e. more likely than not circumstances will result in claim.

• Jacobs v. Coster; Customer injured – made no complaint so owner believed injuries minor and no basis for a claim so did not notify their insurer until he received a solicitor’s letter 7 months later. Held no breach. So not a 50% chance.

2. Insurer must be notified ‘as soon as possible after the occurrence of an event’ – Contextual/subjective interpretation: looked at from the perspective of the party who has to provide the notice. Means ‘as soon as possible to them’ in the circumstances.

• Varelst Administratrix v. Motor Union Insurance Co; Motor insurance policy. The insured was killed in a car accident in India. His personal representatives heard of the insured’s death in that month, but they did not know about the policy to give notice until one year later. Held from the personal representatives’ perspective that they gave notice as soon as possible; i.e. as soon as they discovered the insurance policy existed. It was not possible for them to give notice before they knew of the policy.

Form and Content Obligations:

1. Give Notice within a Particular Time = Strict interpretation, as requirement in absolute terms. Any ambiguity would be construed against the interests of the insurer and in favour of a reasonable interpretation for the insured.

• Cassel; Personal accident policy required notice within 14 days as a condition precedent to indemnity. The insured gave notice as soon as he realised he had been injured 8 months later. Held insurers had the right to reject the claim.

2. Give Notice to a Particular Addressee = Strict interpretation.

3. Content of the Notice = Contextual interpretation. E.g. ‘Full particulars’. E.g. ‘All information relating to the claim’.

• Mason v. Harvey; ‘Full particulars’ is a vague phrase. Must take into account the context of the event and the information available to the party giving the notice.

-------------------------------------------------------------------------------------------------------------------------------------

Futility Principle

Notice is required unless it serves no purpose – this is used as a defence of last resort by an insured who has not complied with notice requirements. They argue that they should be relieved of their obligation to comply with notice requirements because giving it served no purpose.

• Barrett Bros Ltd v. Davies; Lord Denning invented the ‘futility principle’. English law will not require something to be done if it served no purpose. Here UWs already knew the fact of a motor accident from the police. However, this decision is not followed generally.

-------------------------------------------------------------------------------------------------------------------------------------

Effect of Breach

Failure to give the required notice will either be:

1. Breach of a condition precedent as to indemnity in respect of that particular claim; or

2. Give rise to a claim for damages as it is a mere condition of the policy.

How to distinguish?

• Aspen; Teare J said for the condition to be a condition precedent there must be a conditional link between the indemnity and policy obligation so it is clear that if the policy obligation is breached then indemnity will be lost; or made clear indemnity is being given subject to compliance with the condition.

-------------------------------------------------------------------------------------------------------------------------------------

Breach of Express Obligations of Notification / Prosecution of Claims – Effect of Waiver

1. Contractual Waiver – Where the insurer gives an express/implied promise to indemnify the insured in respect of the particular claim. If supported by the insured giving consideration to the insurer then there is a binding agreement = Insurers lose the right to reject the claim in reliance on some condition precedent.

Issue: Unclear where contract is finding contractual waiver and consideration.

• Barrett Bros Ltd v. Davies; Held waiver as insurers wrote, after a failure to notify them, saying they understood proceedings were taking place and asking to be updated to arrange the insured’s defence. Held this was an implied promise to indemnify the insured. Did not identify consideration.

2. Waiver by Estoppel – This requires: a) An express or implied representation by the insurer to ignore breach/indemnify. b) Reliance by the insured on that representation to their detriment. No formal acceptance required.

Issue: Promise / representation made by an agent – can that bind the insurer? Need actual / apparent or ostensible authority.

NB. Delay could be seen as a representation if there was prejudice to the insured or a huge delay (Allen v. Robles).

The doctrine of election is irrelevant as these are merely procedural condition precedents, so cannot end the contract.

-------------------------------------------------------------------------------------------------------------------------------------

Notification and Prosecution of Insurance Claims – Effect of Fraud / Breach DUGF

1. Common law fraud – Insurers are entitled to reject the whole claim (even if parts of it are genuine) as long as the fraud in...