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There is
no determinative principle that a duty on the insured to provide relevant
information within a reasonable time, as part of a condition precedent,
will not be broken if, in the end, it turns out there is no prejudice
to the insurers. Insurers are entitled to have co-operation and relevant
information in good time to be able to assess potential liability and
to take appropriate action.
Shinedean engaged Alldown, to carry out demolition and excavation works.
The works caused the flank wall of an adjoining property to begin to
collapse. Alldown notified its insurer, Axa, of the partial collapse
of the wall, in September 2002. The insurance policy obliged Alldown
to provide all necessary information and assistance to the insurer but
did not contain an express time limit within which this had to be done.
By June 2003 some documents had been supplied but the insurer was of
the view that Alldown was in breach of its obligations and declined
to indemnify it.
Shinedean compromised an action for damages brought by the owners of
the adjoining property and brought proceedings for an indemnity for
this loss (damages and costs) and for damages for its own losses. A
default judgment was obtained against Alldown. Axa, on its own application,
was joined as second defendant at the assessment hearing and the claim
re-pleaded to include claims under the Third Parties (Rights against
Insurers) Act 1930.
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first instance the court had to decide three preliminary issues: |
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Whether
Alldown was in breach of the claims co-operation conditions in the
policy; |
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Whether
compliance with the claims co-operation policy was a condition precedent
to Axa's liability to indemnify Alldown under the policy; and |
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Whether
Axa was thereby entitled to decline to indemnify as a result of
any such breaches by Alldown. |
HHJ Havery
QC held that the claims co-operation conditions in the policy had to
be judged with regard to the contra proferentum rule (that is
any ambiguity to be resolved against the insurer in this case), but
nonetheless, to imply business efficacy into the policy, the insured
had to notify and co-operate within a reasonable time. The time allowed,
however, should be generous, subject to any prejudice caused to the
insurer. The prejudice to an insurer of not being able to close his
books within a reasonable time was important, but in this case the insurer
had accepted that Shinedean was entitled to an indemnity with regard
to the costs incurred by the compromised action and any prejudice was
miniscule. The documents had eventually been supplied and the relevant
conditions had been complied with. In effect, although compliance with
the claims co-operation policy was held to be a condition precedent
of the insurer's liability to indemnify, Alldown had complied as required.
It followed that there were no breaches which the insurer could rely
upon and the indemnity had to be paid under the terms of the policy.
On appeal insurers contended that prejudice to them was immaterial.
Shinedean contended that what is a reasonable time is a question of
fact in each case. There was no rule of law stating that prejudice cannot
be taken into account as one of the relevant facts and circumstances.
In
allowing the appeal May LJ said that each case should turn on its own
facts but there is no determinative principle that a duty on the insured
to provide relevant information within a reasonable time will not be
broken if, in the end, it turns out there is no prejudice. Insurers
are entitled to know where they stand, whether they were in the end
prejudiced by the failure to provide information or not.
Gage LJ and Clarke Mr agreed, the latter adding that a reasonable time
had elapsed long before the relevant documents were provided and that
this conclusion was not met by a further conclusion that the insurer
did not, in the event, suffer more than minuscule prejudice as a result
of the failure to comply with the condition precedent.
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