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Timing Can Be of the Essence in Insurance Claims

Public and product liability insurance policies invariably include a clause requiring the insured to give swift notice of any impending claims. However, in one case, the High Court ruled that insurers took an excessively rigorous approach to such a provision and wrongly refused to indemnify a client following an industrial accident.

A worker lost his sight in an accident involving a power tool which had been hired by a company to the man’s employers. The company informed its insurers of the matter four days after receiving a solicitors’ letter. However, the insurers refused cover on the basis that the company had been aware of the accident long before receiving the letter and had failed to notify them as soon as possible of an event which was likely to give rise to a claim.

In upholding the company’s arguments, the Court noted that it was only some time after the accident that it was first suggested that the tool was faulty or that the company might be to blame. When the accident occurred there was less than a 50 per cent chance that a claim against the company would eventuate. The company had also not been obliged to take any more proactive steps to ascertain whether a claim was likely. In those circumstances, the insurers were obliged to provide an indemnity under the policy.