Relevant Authority and Case Law on notification in respect of circumstances which may give rise to a claim.

This is a summary of relevant authority and case law in respect of an insurer’s right to repudiate liability under a policy due to late notification if timeous notice in respect of circumstances which may give rise to a claim is not given.

1.  RELEVANT AUTHORITY AND CASE LAW ON NOTIFICATION IN RESPECT OF CIRCUMSTANCES WHICH MAY GIVE RISE TO A CLAIM :-

1.1 This is a summary of relevant authority and caselaw in respect of an insurer’s right to repudiate liability under a policy due to late notification if timeous notice in respect of circumstances which may give rise to a claim is not given. We have considered relevant authority and case law in respect of an insurer’s right to repudiate due to late notification if timeous notice in respect of circumstances which may give rise to a claim is not given.

1.2 According to Law of South Africa (“LAWSA”) Volume 12(2) - Second Edition, paragraph250:

“Liability policies as a rule require the insured to notify the insurer of particular facts... The purpose of the notification is to alert the insurer to the possibility of an action, so that they may take steps to mitigate the insured’s loss (liability) and, with it, their liability to pay him an indemnity for it.

Under an-occurrence policy, for instance, the insured will be required to notify the insurer of any occurrence that may give rise to a claim. Notice is to be given of an occurrence giving rise to a claim against the insurer, not of a claim by the third-party against the insured. The insured cannot therefore wait for a third-party claim against it before notifying the insurer of the occurrence having taken place as the duty of notification is not dependent on a third-party claim arising from the occurrence having been made against the insured[1]

As far as the time and form of the notice are concerned, notice is usually required in writing as soon as practicable. If notice is required “as soon as reasonably possible”, that means it is required as soon as is reasonably practicable under all the circumstances.[2] 

1.3  According to LAWSA, Volume 12(1) - SecondEdition, paragraph 380:

“Insurance contracts expressly impose on the insured a duty to give notice of some or other occurrence. The need for such notice is to allow the insurer to investigate the circumstances that may give rise to a claim at the earliest possible time and under the most favourable circumstances and also to ensure that immediate steps may be taken to minimise its potential liability in the event of a claim. Delay in notification, it has been said, may result in serious prejudice to the insurer[3] …

In the case of liability insurances, notice may be required of the occurrence of an event that may, or is likely to, give rise to a claim against the insured[4] …

Frequently the time for notice to be given is not specified, but general words are used to express the urgency with which it must be given. Words such as“immediately”, “forthwith”, or “as soon as possible” are employed in this regard… in short, notice within a reasonable time after the occurrence of the event is required[5]...

A term requiring the insured to notify the insurer of the occurrence of an event is generally construed as a vital term, even in the absence of words empowering the insurer expressly to refuse a claim on breach of the term. The term is regarded as a “condition precedent”.[6] Accordingly, where the insured has failed to give notice within the time specified or, if no time has been specified, within a reasonable time, the insurer is entitled to refuse the claim, irrespective of whether the insurer has suffered any actual prejudice as a result. Strict compliance will be required and any non-compliance, whether because of ignorance or impossibility, however reasonable, will amount to a breach of the term.

A claimant need not prove that he or she has given proper notice, but an insurer wishing to deny liability for non-compliance with a term requiring notice must plead and prove the absence of proper notice as a defence.”

1.4  Norris v Legal & General Assurance Society Ltd 1962 4 SA 743 (C) 745E:

1.4.1  Clause 4 of a fire insurance policy provided that the insured shall on the happening of any loss or damage to the property give immediate notice thereof in writing to the Company. The Court held that:

“there can be no doubt that condition No. 4 was imposed for the benefit of theCompany. The Company would obviously want to know immediately of the happening of a fire so that it could investigate the cause and effect thereof under the most favourable circumstances... Delay in notifying the Company of a fire or in preferring a claim against it might well result in serious prejudice to the Company.

Condition No. 4 imposes an obligation upon the insured which was clearly intended to have some legal effect. What the consequences of non-compliance by the insured are, could, in my opinion, only be one or other of two things, firstly it could absolve the Company from its obligation to indemnify the insured, in which case the condition would be what is called in the decided cases a condition precedent, or it could vest in the company a right of action to recover from the insured any damages occasioned to it by such non-compliance.”

1.5   Thompson v Federated Timbers unreported (KZD), (2011)

1.5.1  This is a judgment of the well-known, as he was then, Wallis J, currently a judge of the Supreme Court of Appeal.

1.5.2  Mr Thompson (the Plaintiff) alleged that he had sustained injuries after he tripped over an electrical cord at a shopping centre owned by Federated Timbers (the First Defendant). The First Defendant pleaded that it had employed Durban Property Cleaning Services (“DPCS”) as an independent contractor to attend to the cleaning of its premises. DPSC notified its insurers, Zurich Insurance Company (South Africa) Limited (“Zurich”), of the joinder, claiming indemnity from Zurich. Zurich rejected the claim alleging that DPCS failed to comply with the notification provisions of the policy. As a result DPCS joined Zurich as a third party to the action. The relevant issue to be decided was thus at what stage was it reasonably possible for DPCS to have notified Zurich of the event?

1.5.3 The notification clause in the policy stated inClause 6 Claims:

“a)  On the happening of any event which may result in a claim under this policy, the insured shall, at their own expense

                         i.  give notice thereof to the company as soon as reasonably possible…”

 

1.5.4  The Court held that “the requirement that the notification be made so soon as reasonably possible must mean so soon as is reasonably practicable in all the circumstances. The enquiry is a factu alone. And the answer will depend upon the circumstances of each particular case.”

1.5.5  The Court held further that while the test for reasonableness is an objective one, he highlighted the necessity to consider certain subjective elements. The Court stated that “it is perfectly conceivable that an insured person may know that an event has occurred but have no knowledge of the potential for a claim to arise in consequence of that event”. The Court went on to emphasise that “even if the insured is aware that a particular event has occurred and that damage has resulted, the circumstances may be such that there is no appreciation of the potential for a claim.That is particularly so when dealing with the type of cover under consideration in this case.”

1.5.6  The Court held that two issues potentially arise as to whether in fact there was an appreciation of the possibility of a claim being made under the insurance policy or not:

1.5.6.1   “If there was such an appreciation then that is an end to the matter. The obligation to notify the insurer of the relevant event is then clear.

1.5.6.2   If, however, the court is not satisfied that there was such an appreciation that does not resolve the issue the other way. If the failure to appreciate the possibility of a claim is unreasonable, in the sense that a reasonable insured in the same position would appreciate the possibility of a claim, the fact that this particular insured did not [appreciate the possibility of a claim] cannot, I think, relieve it of the consequences of its failure to notify the insurer of the event.”

1.5.7   The Court thus considered DPCS’ approach as to why Zurich was not notified of the claim sooner. The Court held that DPCS did not fully appreciate the obligation imposed under Clause 6(a)(i). The Court stated that:

That obligation is to notify the insurer of the happening of any event, such as Mr Thompson’s fall, which could lead DPCS to make a claim against Zurich under the insurance policy. It is not an obligation to notify of the event only if or once a claim has been made… The fact that the obligation to notify the company of a claim against the insured is dealt with separately in sub-clause (iii)from the obligation to notify the company of an event in sub-clause (i) makes it clear that the obligation to notify the insurer under the first clause is not dependent upon a claim having been made against the insured. The obligation to notify the insurer of a claim arises separately under clauses 6(a)(iii) and (iv).”

1.5.8   The Court found that when DPCS was told about this incident it appreciated that there was some small risk that it might result in a claim that it would in turn refer to its insurer for an indemnity. The Court thus dismissed the claim for an indemnity against Zurich.


[1]Thompson v Federated Timbers unreported (KZD), (2011). See a detailed discussion of this case in paragraph 6.4 below.

[2]Thompson v Federated Timbers supra.

[3] Norris v Legal & General Assurance Society Ltd 1962 4 SA 743 (C) 745E. See discussion of this case in paragraph 6.3 of this report.

[4] Thompson v Federated Timbers supra.

[5] Thompson v Federated Timbers supra.

[6] Norris v Legal & General Assurance Society Ltd supra.

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