Gary Meggitt reports on a case that struck a blow for clarity in policy wordings
The Court of Appeal's decision in Hayward v Norwich Union in February 2001 was greeted by insurers as a victory for the plain English interpretation of policy wordings (Insurance Times, 8 March 2001). There was more good news from the Court of Appeal in December 2001, with its judgment in George Hunt Cranes v Scottish Boiler & General Insurance Co (Hunt v SB&GI).
In July 1997, Hunt hired out plant equipment to FTP and SB&GI indemnified FTP against its liability to Hunt for any damage to the equipment. The equipment was damaged in September 1997; FTP entered voluntary liquidation in March 1998; and, in June 1998, Hunt obtained judgment against FTP for £21,408.08 for the damaged equipment. SB&GI rejected Hunt's claim, under the policy, for this sum under the Third Parties (Rights Against Insurers) Act 1930 as the claim was made over three months after the damage was caused. General condition 2(c) of the policy stated that any claim must be made within 30 days of the relevant loss and added: "No claim under this policy shall be payable unless the terms of this condition have been complied with".
The Mercantile Court dismissed Hunt's claim. Hunt appealed that the policy should be construed as a whole, taking into account other conditions that were expressly referred to as "condition precedent". It argued the absence of these words in condition 2(c) meant late notification was not fatal to the claim.
The Court of Appeal also rejected Hunt's claim. It held that condition 2(c) stated the intention of the parties in clear terms, namely SB&GI would not be liable if a claim was made after the specified 30 days. However, the policy had to be read as a whole to decide whether condition 2(c) was a condition precedent. The presence or absence of the words "condition precedent" was not decisive. Their use in one clause and not in another did not mean that the latter was not a condition precedent. Lord Justice Potter believed condition 2(c) left "no room for doubt or ambiguity" despite the absence of the words "condition precedent". Its purpose was to give SB&GI sufficient time to investigate and decide upon a claim. FTP, and therefore Hunt, had to make a claim within the 30-day limit. SB&GI's rejection was justified.
The courts are often criticised for interpreting allegedly ambiguous policy wordings in claimants' favour. If so, the best course of action for insurers is to tighten up policy wordings.
George Hunt v Scottish Boiler & General Insurance Co demonstrates this can produce favourable judgments, albeit that the use of the words "condition precedent" in clause 2(c) might have defeated Hunt's claim long before it reached the Court of Appeal. n
Gary Meggitt is a professional indemnity solicitor at Fishburn Morgan Cole