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Ruling finds insurer doesn’t need to pay out on historic accident claim

Imagine you operate an outdoor motorbike track at which a child has an accident.

You are assured by the family that they do not hold you responsible but over seven months later you receive a legal letter saying that they now hold you responsible. What would you do? Notify your insurer when you received the letter and assume that your insurer would deal with matters?

This was the issue that the court looked at in the case of Arch Insurance (UK) Limited v McCullough [2021] 9WLUK 136.

The Defendant owned an outdoor motorcycle track and held a commercial combined policy which included public liability cover with the Claimant. On 26th October 2019 a child had an accident at the track and suffered serious injuries. The Defendant stayed in touch with the child’s family and was advised that they did not regard the Defendant as responsible for the child’s injuries. Over seven months later the Defendant received a letter of claim from the child’s lawyers saying that they held the Defendant liable for the accident. Shortly after that date the matter was notified to the Claimant by the Defendant.

Under the terms of the policy the Defendant was obliged to “as soon as reasonably practicable” give written notice of any circumstances that might give rise to a claim being made against him. The Claimant argued that the Defendant had not given notice in a timely manner and therefore they were entitled to deny liability for the claim.

The court agreed with the Claimant finding that the reassurances that no claim would be made were informal. The evidence also showed that the Defendant had made investigations into the cause of the accident and had sought out the reassurances. The court took the view that this demonstrated that the Defendant appreciated the seriousness of the accident and that there was a real risk of a claim being made. As a result of the delay insurers had been unable to carry out certain investigations in relation to who was liable for the accident. The court therefore made a declaration that the insurers were not liable to meet the claim.

This case demonstrates that as soon as an incident arises it is prudent for an insured to report matters either to the insurers or to their brokers who in turn will report it to insurers. Whilst not every incident will result in a claim being brought it is better to report matters and ultimately the matter is dropped rather than face the situation the Defendant is in here: a significant personal injury claim where the Defendant will have to meet any damages and costs award personally.

If you find yourself in a situation where there is a conflict with your insurers, or the insured, our team of commercial litigators may be able to help. Contact one of our specialists to find out more.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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