Background
Daniel Makin suffered a stroke and serious neurological injury after a Protec Security Group door supervisor forced him to the ground and held him in a headlock outside a restaurant in August 2017. Makin sued the restaurant operator and Protec, although he later discontinued the claim against the restaurant. Protec did not notify its public-liability insurer, QBE, of the incident in 2017, despite its director learning within the policy’s 30-day notification period that police wished to interview Protec’s staff about an incident in which a person had allegedly been injured.
Protec also failed promptly to forward correspondence received in December 2019 concerning Makin’s contemplated claim and a June 2020 letter of claim addressed directly to Protec. QBE first learned of the potential claim from Makin’s solicitors in July 2020 and later declined cover. Protec entered liquidation on 10 July 2023. The following day, after trying liability as a preliminary issue without QBE’s participation, HHJ Sephton KC held that the assault caused Makin’s stroke and entered judgment against Protec for damages to be assessed.
Makin then joined QBE and sought recovery under the Third Parties (Rights Against Insurers) Act 2010. HHJ Pearce held that QBE was not liable because Protec had breached the policy’s notification provisions, which were conditions precedent to cover. Makin appealed.
The Court’s Holding
The Court of Appeal unanimously dismissed the appeal. It held that Protec breached Claims Condition 3.5 when it failed to report the incident after its director acquired, within the specified 30-day period, enough information to make a reasonable insured consider that there was a real possibility of a claim. The condition did not require Protec to conduct a continuing investigation, but it was triggered when Protec actually acquired the relevant knowledge during that period.
The court also held that Protec breached Claims Condition 2 by failing immediately to forward the December 2019 correspondence and the June 2020 letter of claim. Despite defective drafting, the provision clearly required an insured to forward unanswered documents whose contents indicated that a claim might arise under the policy.
The notification provisions were conditions precedent to QBE’s liability. The words stating that breach “will entitle” QBE to refuse to deal with the claim gave QBE an unqualified contractual right, not a discretion subject to a rationality or reasonableness constraint. QBE therefore did not need to prove that the late notification caused prejudice. The court noted that the earlier judgment had not yet established Protec’s liability for purposes of section 1(4) of the 2010 Act because damages had not been quantified, and it declined to decide whether a completed judgment against an insured would prevent an insurer from disputing the established liability.
Key Takeaways
- A time-limited notification clause may be triggered when the insured acquires relevant knowledge during the notification period, even if the incident initially appeared unlikely to produce a claim.
- Policy language giving an insurer an unqualified entitlement to refuse a claim after breach can create a condition precedent even without using the label “condition precedent.”
- Where such a notification term is a condition precedent, the insurer need not demonstrate prejudice resulting from the insured’s breach.
Why It Matters
The decision emphasizes that insured businesses must reassess their reporting obligation when material information comes to their attention within a policy’s express notification window. An incident that appears innocuous at first can become notifiable when later information reveals a real possibility of a covered claim.
For claimants proceeding against an insolvent defendant’s insurer under the 2010 Act, the ruling confirms that transferred rights remain subject to the insured’s compliance with policy conditions. It also leaves open an important question about whether an insurer may contest liability established by a judgment against the insured once both liability and quantum have been determined.