A Bar To Recovery? Catastrophic Injury And Conditions Precedent

The decision of His Honour Judge Pearce in Makin v Protec & QBE [2025] EWHC 895 (KB) is a significant High Court decision which considers whether the duty to notify timeously was a condition precedent under a policy of insurance.

Charles Bagot KC and Tom Bell appeared for the Claimant, instructed by Your Law LLP

The Background

The Claimant sustained a serious injury when he was ejected from Muse Bar and Restaurant ("the Bar"), in Oldham on 6 August 2017. Despite being in high spirits on arrival at the Bar, at around 8:30pm he threw a glass on the floor. The door supervisors, Mr Diallo and Mr Coupe, ejected him, and there was an altercation outside the premises. One of the door supervisors held the Claimant in a headlock. After the altercation, the Claimant stood up and walked away from the scene, taking a taxi home. Two days later, the Claimant's mother attended his home due to his lack of contact, and she discovered that he had suffered a stroke. The Claimant was left with serious neurological disability as a result of the stroke.

The Claimant brought a claim for damages against the First Defendant, which was the operator of the Bar, and the Second Defendant, which was alleged to be the employer of Messrs Diallo and Coupe. The claim against the First Defendant was discontinued. There was a preliminary issue trial before His Honour Judge Sephton KC on 11 July 2023; the Second Defendant was not in attendance, joint liquidators having been appointed over the company on the day preceding the trial. The trial established that the Claimant's stroke and consequent injury were the result of an assault by Mr Diallo, and that the Second Defendant was vicariously liable for that assault and consequent injury.

At the time of the incident, the Third Defendant (QBE Insurance (Europe) Limited) was the Second Defendant's public liability insurer under an insurance policy entitled "Security & Fire Protection" for the period of 28 February 2017 to 28 February 2018 ("the Policy"). The Claims Conditions section read, so far as relevant, as follows:

CLAIMS CONDITIONS

The following Conditions 1-10 must be complied with after an incident that may give rise to a claim under your policy. Breach of these conditions will entitle us to refuse to deal with the relevant claim.

...

2) Writ, summons, etc

You must not respond to any letter, writ or summons or other document sent to you in connection with any accident, incident or occurrence that may relate to any claim under your policy or which may give rise to a claim under any Section of your policy. You must immediately send them to Sutton Specialist Risks Ltd unanswered by return of post, or to us or legal representatives as may otherwise be advised by us.

3) Notification of claims

You or any other party insured by your policy must inform Sutton Specialist Risks Ltd:

3.1) immediately you have knowledge of any impending prosecution, inquest or inquiry in connection with any accident or disease, which may be the subject of claim, give notice in writing and give us any further information and assistance we may require,

...

3.5) within as soon as practical but in any event within thirty (30) days in the case of any other damage, bodily injury, incident, accident or occurrence, that may give rise to a claim under any your policy but not separate specified above."

The Third Defendant was joined to the action pursuant to the Third Parties (Rights Against Insurers) Act 2010 on the basis that the Second Defendant was (or was potentially) subject to a liability to the Claimant which liability was insured under the contract of insurance with the Third Defendant. The Third Defendant accepted that the Policy was capable of responding to the Claim. The parties agreed that the Claimant was a third party within the meaning of Section 1 of the 2010 Act, that the Second Defendant was a "relevant person" within the meaning of that section, and the Claimant was therefore within the class of persons entitled to pursue the insurer under the Act.

The Third Defendant argued that it was not liable to the Claimant because of a failure by the Second Defendant to notify the Third Defendant of the Claimant's claim in accordance with the terms of the Policy, specifically, clauses 2 and 3.5 as set out above. The Claimant had written a Letter of Claim on 29 October 2019 and had corresponded thereafter, but the Third Defendant was not notified of the claim until July 2020 when the Claimant's Solicitors sent an email enclosing the Letter of Claim from the Claimant's Solicitors to the Second Defendant dated 5 June 2020.

The Claimant disputed the argument that there was a breach of the policy condition concerning notification, but argued that in any event, even if there had been a breach, the breach was not a condition precedent, automatically disentitling the insured to the relevant cover, but rather gave the Third Defendant a discretion to decline cover. Moreover, the Claimant argued that there was no rational basis for the Third Defendant to exercise its discretion to decline cover. A further issue arose as to whether the judgment of HHJ Sephton KC was binding in the proceedings. The four key issues were therefore:

1. Was the Second Defendant in breach of the Claims Conditions under the Policy?
2. If the Second Defendant was in breach of the Claims Conditions, was the result that the Third Defendant was entitled to refuse cover as of right for the breach of a condition precedent or did it limit the Third Defendant to exercising a discretion to refuse cover?
3. If the Second Defendant was in breach of the Claims Conditions but that breach did not automatically entitle the Third Defendant to refuse cover, was it entitled to refuse cover on the facts of the case?
4. Is the judgment of HHJ Sephton KC on issues of breach of duty on the part of the Second Defendant and causation of injury binding on the Third Defendant for all purposes?

This article focuses on the two central issues – issues 1 and 2. Before doing so, it is worth mentioning that the court explicitly dealt with the fact that the matters relied upon by the Third Defendant in support of the contention that Second Defendant was in breach of the Claims Conditions, were not the fault of the Claimant or those acting for him. The Defence to the claim involved criticism of the Second Defendant's inaction. HHJ Pearce stated that "that irony is not lost on the court, though it is an inevitable consequence of the structure of a scheme by which the Second Defendant's rights under the policy vest in the Claimant" (paragraph 14).

Issue 1 – Was the Second Defendant in breach of the Claims Conditions under the Policy?

The Claimant contended that no breach of the notification obligation under Claims Condition 3.5 arose because the incident was not notifiable under that condition. As was apparent from video footage of the incident, the Claimant stood up and walked away at the end of the altercation. The Third Defendant's letter of 1 December 2020 did not state that the incident on its own was such that the Second Defendant was or should have been aware of facts that "may give rise to a claim", therefore the obligation to notify under Clause 3.5 could not have arisen at the time of the incident.

The Claimant also contended that the argument that the Second Defendant may have come under an obligation at some later point to give notice of the incident to the Third Defendant is inconsistent with a proper interpretation of Condition 3.5. The Claimant relied upon the decision of Zurich Insurance plc v Maccaferri Ltd [2016] EWCA Civ 1302 – specifically, the principle that the chance of a claim being made is to be assessed on the basis of the incident itself (though not limited to the exact moment of its occurrence), without regard to matters that come to light subsequently (paragraph 34).

As to Condition 3.5, the Third Defendant argued that the Second Defendant was under an obligation to inform it of the happening of an incident whereby there was, "judged objectively, a real as opposed to a fanciful risk that the incident might give rise to a claim under the policy" (see Teare J in Aspen v Pectel Ltd [2008] EWHC 2804 (Comms) at [9]) (paragraph 40). As to Claims Condition 2, the Third Defendant drew the court's attention to the Letter of Claim of 29 October 2019 addressed to the First Defendant. The Third Defendant averred that anyone reading that letter would realise it was notifying a potential claim on behalf of the Claimant for damages for personal injuries against whoever was liable for the actions of the door staff, and that the very heading "Letter if Claim – Catastrophic Injury" made that plain.

The Third Defendant rejected the Claimant's contention that there was an ambiguity of drafting. Although the Third Defendant accepted that the contra proferentem rule would apply to the insurer which drafted the policy, it submitted that there was no such ambiguity. It was contended that it was extremely clear that the obligation created by Condition 2 is one not to respond to documents which were either:

• a) In connection with any accident etc. which might relate to an existing claim, or
• b) Contained information relating to an incident which might give rise to a claim.

HHJ Pearce considered Claims Condition 3.5, and accepted the Claimant's argument that, judged at the time of the incident or its aftermath, no reasonable insured could be expected to have formed the view that it involved circumstances that "may give rise to a claim" under the Policy, given that the Claimant was able to get up and walk away after being restrained. However, Mr Lucas (the sole director of the Second Defendant) stated in his witness statement that he had become aware that Messrs Diallo and Coupe were due to be interviewed. As such, HHJ Pearce was satisfied that well within the period of 30 days from the incident, Mr Lucas either was aware (or at the very least a reasonable injured in his position would have been aware) that this was an incident where the door staff of the Second Defendant were at least potentially being criticised for injuring a customer with whom they had had contact. The case was far more akin to the situation in Aspen v Pectel than the case of Zurich v Maccaferri, both on legal and factual grounds:

• i) On legal grounds, there is an obvious similarity in the terms of Claims Condition 3.5 and condition 4 in Aspen v Pectel, both of which refer to an obligation to give notice where an incident "may give rise" to a claim under the policy in respect of which an indemnity might arise. Conversely, the clause in Maccaferri, referring to an event which is "likely to give rise" to a claim clearly indicates a higher threshold.
• ii) On the facts of the case, the matters of which Mr Lucas became aware shortly after the incident were matters which were only likely to be consistent with a concern that there might have been fault on the part of the door staff. In contrast, the facts known to the insured in Maccaferri were far less specific and were on their face consistent with an investigation of events seeking to establish what had occurred, rather than blaming any particular person or company (paragraph 57).

HHJ Pearce found that on the evidence, the material that was known to Mr Lucas (the sole director of the Second Defendant) either whilst he was on holiday or on his return from leave, particularly that the police wished to interview the door staff about an incident, was likely to lead someone to think that there might be a claim against the Second Defendant in respect of which the insurance policy provided cover. This conclusion did not involve the court engaging in some kind of roving review of what Mr Lucas knew as matters developed – but rather, caused the judge to conclude that there was a clear point in time where the matters known to Mr Lucas included the fact that police wanted to interview members of his staff in respect of an incident where a person had allegedly suffered injury and gave rise to the duty to notify under Claims Condition 3.5 (paragraph 58).

The Claimant's third suggested reading of the first sentence of Claims Condition 2 contended that what was intended by the language may have been:

"You must not respond to any letter, writ or summons or other document sent to you

(a) that may relate to any claim under your policy or

(b) in connection with any accident, incident or occurrence which may give rise to a claim under any Section of your policy.

You must immediately send them to Sutton Specialist Risks Ltd unanswered by return of post, or to us or legal representatives as may otherwise be advised by us." (paragraph 61).

HHJ Pearce stated that the court must be careful not to overstep the mark by using construction tools to resolve genuine contractual ambiguities. Where there is no ambiguity, there is no role for the application of the contra proferentem principle to favour a different reading (see the judgment of the Divisional Court in Financial Conduct Authority v Arch [2020] EWJC 2448): "the court must simply decide whether on the one hand the wording of the clause can properly be construed in a way that makes sense or alternatively whether it should disregard the clause as being so ambiguous as to be incapable of meaning" (paragraph 62).

HHJ Pearce considered that Claims Condition 2 fell into the first of these two categories. Bearing in mind that the parties had agreed terms in the contract, and that the court should so far as possible give meaning to those terms, he was not able to identify any other meaning of those words other than the Claimant's third suggested reading (the Third Defendant's reading of the words was to like effect).

Moving on to consider breach of these conditions, HHJ Pearce held that the failure to send a letter within more than 4 weeks of receipt was in breach of an obligation to forward the letter "immediately".

Issue 2 – If the Second Defendant was in breach of the Claims Conditions, was the result that the Third Defendant was entitled to refuse cover as of right for the breach of a condition precedent or did it limit the Third Defendant to exercising a discretion to refuse cover?

The Claimant submitted that the header of the Claims Conditions section of the Policy which stated that "Breach of these conditions will entitle us to refuse to deal with the relevant claim" was capable of being interpreted either as granting the Third Defendant an absolute right to reject the claim if the conditions are not met or alternatively as giving the Third Defendant a discretion to refuse cover.

The Claimant argued inter alia that the words "condition precedent" or other similar language could have been used if the Third Defendant intended to make clear that non-compliance was a bar to recovery. In fact, the phrase "Condition Precedent" was used in other parts of the Policy, but not here. In essence, the terms of the Claims Conditions lacked the clarity that would be required to render them conditions precedent in the context of a policy that elsewhere made terms a condition precedent to its liability.

The Third Defendant relied upon the statement or principle from MacGillivray on Insurance Law (15^th edition) at [19–040]:

The Third Defendant argued that the relevant contractual condition did not need to be expressed as a condition precedent, as was apparent from MacGillivray at [19–040]. The statement in the header made it clear that there was a conditionality between the obligation to give notice and the underwriters' obligation to pay. The Third Defendant also pointed to a similarity between the wording of the Policy, and the wording of a policy in the case of Cuckow v AXA Insurance UK Plc [2023] EWHC 701 (KB). As in that case, the wording of the Policy "serves a commercial purpose of ensuring that the Third Defendant is notified of a claim at the earliest opportunity, thereby allowing it to take steps to investigate any liability to indemnify its insured and/or to take steps to minimise its potential liability." (paragraph 77).

Insofar as the phrase "condition precedent" was used in other parts of the Policy but not in respect of the particular clauses in issue before the court, the Third Defendant contended that this did not exclude the clause having effect as if it were so described. In Aspen v Pectel, Teare J was faced with the same argument as to the use of the phrase "condition precedent" in respect of other clauses of the contract but not the particular clause which pertained to notification. He held that [at 68]:

"I do not consider that the use of the words 'condition precedent' in the endorsement and the absence of such words in condition 13 mean that condition 13 must be construed in a manner which removes a conditional link between compliance with condition 4(a) and the underwriter's obligation to pay. The words used in condition 13 are clear, even though they do not use the term 'condition precedent' ." (paragraph 81).

The Third Defendant also highlighted a number of the commercial benefits of early notification in support of its arguments, including but not limited to the fact that: (i) early notification enables the insurer to investigate the claim at a time when it is likely to be easier to contact witnesses; (ii) it enables the insurer to consider whether to offer rehabilitation as soon as possible; (iii) it enables the insurer to consider early settlement. The Third Defendant argued that the commercial benefits therefore justified the court leaning in favour of the construction of such clauses as conditions precedent to any liability on the part of the insurer (paragraph 83).

HHJ Pearce was not persuaded that there could truly be said to be an ambiguity given the use of the word "will" ("Breach of these conditions will entitle us to refuse to deal with the relevant claim"). Concluding that non-compliance with the Claims Conditions gives the insurer merely a discretion to decline indemnity does an injustice to that language. Accordingly, it was held that compliance with the Claims Conditions was a condition precedent to liability. The Defendant's non-compliance with Claims Conditions 3.5 and 2 thus entitled the Third Defendant as of right to refuse indemnity under the Policy.

Conclusion

As to Issue 3, HHJ Pearce considered that but for the decision on Issue 2, the Third Defendant would not have been able to show that the decision to refuse indemnity under either Claims Condition and in respect of any of the breaches was a proper exercise of any contractual discretion. Had the judge found the existence of a contractual discretion to decline to meet the claim, he accepted the Claimant's argument that whether the Third Defendant was entitled to exercise that discretion was to be judged in accordance the dictum of Lady Hale in Braganza v BP Shipping Ltd [2015] UKSC 17, namely that the decision must be lawful and rational as well as made in good faith and consistent with its contractual purpose, "I have no doubt that the contractual purpose of this clause was to avoid the Third Defendant having to meet claims where it was or may have been prejudiced by a delay I notification [...]". However, the third Defendant did not argue that there was any detriment in the failure to notify it of the Letter of Claim sent by the Defendant in June 2020 (the letter was sent to the Third Defendant one month later) – nor did the Third Defendant argue that a short delay was so distant in time from the underlying incident such that it was capable of causing prejudice (Paragraphs 10-1065).

On issue 4, the judgment of HHJ Sephton KC would have been binding on the Third Defendant in the same manner in which it was binding on the Second Defendant, but for the findings on the other issues. In view of the findings on the first two issues, it therefore followed that the Third Defendant was not liable to the Claimant pursuant to the 2010 Act.

Despite the Claimant not being responsible for any of the breaches or delays, he recovered nothing. The judgment serves as an important reminder that there are strong policy reasons as to why an insurer should wish such notification to be a condition precedent to its liability. In addition to the commercial benefits that come from dealing with a claim that is notified timeously (see paragraph 83), there is also the added practical benefit to an insurer in avoiding the kind of arguments that were ventilated before HHJ Pearce as to whether late notification does in fact prejudice the insurer. As paragraph 84 of the judgment warns: "It may be difficult in any particular case to show prejudice, even if an insurer is able to show a commercial landscape in which early notification may have advantages to its business." The judgment also provides a cautionary reminder that even if a condition does not have the express label of a condition precedent, it is certainly capable of being construed as such. Policyholders therefore need to be careful to construe policies as a whole, and to be alive to the notification requirements. Similarly, careful drafting of policy documents is crucial.

I understand that the trial judge has since granted permission to appeal on the issue of whether the terms in issue were conditions precedent – therefore the matter will be considered by the Court of Appeal in due course.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.