Many an insured has come unstuck in pursuit of an insurance claim by finding themselves in breach of a “claims cooperation” clause in their insurance policy. Almost invariably framed as a condition precedent, these are clauses which require the insured to cooperate with insurers in, amongst other things, the provision of information following events giving rise to a claim.
Since these clauses are expressed as conditions precedent, the consequences of a failure to abide by their provisions will be harsh. The insured will, absent some indulgence by the insurer, forfeit what may otherwise be a perfectly valid claim.
Unlike the position in some other jurisdictions, the insurer does not need to show that its position has been prejudiced by the breach (Shinedean Ltd v Alldown Demolition), merely that the breach has taken place. In this context, for example, a provision which contains strict time limits must be adhered to – no concessions will be made to an insured who is unable, for practical reasons, to provide proofs within time.
In the long-running dispute of Ted Baker v AXA, however, two important issues were resolved in favour of the insured, both of which make some inroad into the harsh and unforgiving nature of these clauses.
The relevant issues centred around a request from the insurer’s loss adjuster for a “shopping list” of documentation, which he wished to see in relation to establishing the quantum of the claim. Of the seven categories on the list, the first item was provided. However, in respect of the remaining six categories, Ted Baker and its brokers took the position that the documentation would not be provided until either insurers accepted liability for the claim in principle, or confirmed that they would pay for the information to be produced (some of the requests were onerous and would have required the assistance of external accountants).
The first of the issues to be resolved was whether the requests were “reasonable.” In a potentially important decision at first instance (not appealed on this point), Eder J found that the requests which were onerous were not reasonable in circumstances where insurers had not yet accepted liability in principle.
However, Eder J found that one category (management accounts) would have been easy to produce and thus the request was reasonable. In failing to supply that category, therefore, the insured was in breach of the claims cooperation provision and the claim failed.
The Court of Appeal disagreed. In the circumstances of the case (in particular where the insured had made it clear that it regarded the provision of all the items on the list as parked pending a decision on prima facie liability) it held that insurers were under a duty to make their position plain if they did not share that view. In other words, they could not stay silent and then later allege a breach of condition precedent based on the failure to provide this one category of document.
The end result is that the position in respect of these clauses may fairly be said to have softened somewhat. First, the fact that what is a reasonable request may be informed by whether or not insurers have confirmed liability is useful for insureds – a common reason for failing to comply with these conditions is that the insured is faced with demands for voluminous information without knowing whether or not insurers are even going to accept the claim. Of course if the information sought goes to liability, then the insured will have to provide it, but – on the strength of this case at least – that will not necessarily be so if the information sought goes to quantum.
Second, in the right circumstances, insurers may be precluded from relying on this defence in circumstances where they have kept silent in the face of apparent non-compliance with the clause by the insured. This will by no means be so in every single case; the Court of Appeal confirmed in Ted Baker that the position remains that there is no general duty on insurers to warn the insured that it may be acting in breach of policy conditions. Given that the application of these principles is highly fact sensitive, the prudent course will remain that of seeking clarity where the position is ambiguous.