One of the most commonly used phrases in the English language is “as soon as possible”. We all think we know what it means – doesn’t it sit somewhere between “immediately” and “as soon as reasonably practicable” ? The meaning of the phrase is critical when one party is seeking to rely on it to blame the other party and deny the other party of an entitlement that otherwise existed.
Designers hold professional indemnity insurance. Manufacturers hold product liability and public liability insurance. All of those policies may say that any circumstances that may give rise to a claim must be notified to the broker as soon as possible. The Court of Appeal recently analysed whether an insured party had fulfilled that test and was entitled to cover.
The case of Zurich Insurance v Maccaferri relates to the personal injury caused by a pneumatic lacing tool known as a spenax gun, that “fires” C-clips to bind up steel mesh gabions. Picture a giant stapler.
Maccaferri hired a separate company to repair the guns. Maccaferri also leased the guns to builder’s merchants, who in turn hired out the guns to builders. An employee of the builder moved the gun out of the way of a digger and a C-clip ejected and hit him in the face.
It later transpired that the contractor’s accident book was only updated a week after the accident. Three months later, no one had heard anything further. Maccaferri staff received a couple of phone calls saying that there had been an accident on site and one of its guns had been withdrawn by the claimants’ solicitors for testing. Maccaferri staff also heard anecdotally in the pub that someone lost an eye on that site. However Maccaferri staff did not consider it likely that the gun was at fault because it was maintained, serviced and tested regularly, and instead thought it was user error. Maccaferri did not hear anything for 10 months. Maccaferri were only joined as a party to legal proceedings 22 months after the injury occurred on site. At that point Maccaferri notified insurers.
A settlement was reached with the injured party – Maccaferri’s share was £233,000 – but Zurich refused cover for Maccaferri on two grounds: firstly that the circumstances had not been notified under the policy as soon as possible and secondly that Maccaferri failed to investigate the matter so failed to establish the likelihood of a claim.
The test for a possible claim is settled law – the insured defendant must have sufficient information to know that the event would have at least a 50% chance of a claim arising (Layher v Lowe).
The Court of Appeal agreed with the High Court judge that if Zurich Insurance had meant the policy to say “to give notice of any event likely to give rise to a claim, as soon as sufficient information and/or particulars about the likelihood of a claim were to hand so as to make it both possible and reasonably practical to give such notice” then why didn’t they write that expressly in the policy terms ? Zurich were attempting to stretch ‘as soon as possible’ to mean that, so that they could reject the claim.
Where a party is relying on something ambiguous, it will be interpreted against them – i.e. a favourable interpretation on the ambiguity in favour of to the party who might lose its rights. That is what happened here – the phrase could not be stretched as far as Zurich wanted, and certainly not so far as to deny rights. The level of knowledge of Maccaferri staff at the time of the accident and the context of regular maintenance meant that they reasonably believed a claim was unlikely and did not notify until more information came to light to increase the chances of a claim above 50%. There was no positive duty on Maccaferri to investigate and find a claim. As a result Zurich were not entitled to reject the claim.
So if you are writing contracts – be clear about what you want or it will be held against you. Contracts are given their ordinary meaning where possible but if the clause is unclear, then there may be a loophole.