Duty To Comply With Claims Cooperation Clause Where Insurer Has Denied Liability/Proving Quantum

Author:Mr Jon Turnbull and Michelle M. Radom
Profession:Clyde & Co
 
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After Eder J held, as a preliminary issue, that the insurance policy in question did cover theft by employees, despite the insured's non-selection of a "Theft by Employees Section" (and so the insurer couldn't reject the claim on that basis), the insured proceeded to bring a claim for business interruption losses. This was an unusual BI claim, because such claims are normally based on a single adverse event, such as a fire or flood or major burglary which is immediately known to the insured and which causes major losses of profit clearly reflected in the insured's accounts. By contrast, here the alleged thefts took place more than 500 times over more than five years (and spanning some five policy years) before discovery in December 2008, and the allegations of loss were founded not on accounts but instead on calculations based on various assumptions. Although the case is fact-specific, some general points of interest arose:

1) Complying with a Claims Cooperation Clause ("CCC"): the policy contained a claims condition that (inter alia), "in the event of a claim being made", the insured would provide particulars of its claim within 30 days after expiry of the Indemnity period, and deliver accounts and other "documents proofs information explanation and other evidence as may be reasonably required" by the insurer to investigate the claim. It was also provided that "if the terms of this condition have not been complied with, no claims under this Section shall be payable", and the term was accepted to be a condition precedent.

The insured argued that no claim could be made here until after discovery of the theft in December 2008, and hence there was no obligation to deliver particulars of the claim before that time. That argument was rejected by the judge. It did not matter that the insured did not discover the thefts until 30 days after the indemnity periods had expired under earlier policies. Particulars had not been sent until 17 February 2009 and so the insured had breached this requirement in respect of all thefts prior to 18 January 2008. However, although the judge accepted that insurers could have "pulled the shutters down" in relation to those thefts, he found that they had not done so on the facts.

Eder J also approved textbook commentary to the effect that "full particulars" means "the best particulars the assured can reasonably give", and (unless the policy states otherwise) further particulars can be supplied later on.

The judge did...

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