‘Speak now, or forever hold your peace’ Irish High Court rules insurer was justified in refusing cover for late notification

Introduction

The failure or delay in notifying a claim is a common source of controversy between an insurer and its policyholder. In assessing compliance with a particular policy notification, reliance is often placed on UK cases.

The decision in the recent High Court case of Moloney v Cashel Taverns Limited (In Voluntary Liquidation) & Anor [10.12.20] is a welcome addition to the body of Irish case law. The Court held that Liberty Insurance DAC (insurer) was justified in refusing indemnity to Cashel Taverns Limited (insured) as the insured was fully aware of the incident giving rise to the claim but failed to promptly notify its insurer.

Background

The plaintiff issued proceedings against the insured after an accident suffered at work, and was awarded damages of €37,332. When the insured was subsequently put into voluntary liquidation, the plaintiff joined the insurer as a co-defendant, pursuant to Section 62 of the Civil Liability Act 1961.

Section 62 allows for the ring-fencing of money payable by insurers in respect of a valid claim and prevents the use of that money to discharge the company's debts in the liquidation. 

Notification

Clause 8 (a)(i) of the policy required the insured to notify the insurer immediately on becoming aware of any incident or as soon as practically possible thereafter.

The insured notified the insurer of the incident seventeen months after it occurred, when it received a “Letter Before Action”.

The insurer immediately referred to late notification and reserved its rights under the policy. After lengthy investigations, the insurer notified the insured that it would not be providing an indemnity.

High Court

The key issue was whether the insurer was entitled to refuse indemnity in respect of the claim, due to late notification.

Key arguments

The insured argued that only a manager had knowledge of the incident (not a director), and that because a “manager” was defined as an “employee” in the policy, this did not amount to knowledge on the part of the Insured.

The insurer contended that knowledge on the manager’s part must be attributed to the Insured, that it was entitled to repudiate liability due to late notification, and that general principles as to how companies conduct their business were relevant in construing the contract of insurance.

Judgment - highlights

• The plain meaning of the policy was that the insured had a duty to notify. To hold that knowledge on the part of a senior manager did not constitute knowledge on the part of the insured would render the policy unworkable.
• The insured had been dealing directly with PIAB and made decisions (consistent with it knowing that it had notified the incident too late).
• A breach of a condition precedent meant that the insurer was not liable to meet the claim.
• If a policy is validly repudiated by an insurer, moneys will not be payable to the company under Section 62.
• It was not necessary to prove that the insurer had been prejudiced.

Consumer Insurance Contracts Act 2019 (CICA)

Since the incident in this case occurred, certain provisions of CICA have commenced, which apply to insurance contracts with consumers. Pursuant to section 16(2), a consumer must notify an insured event within a reasonable time, however, where there is a failure to comply with a specified notification period, the insurer must show prejudice before being entitled to refuse cover (section 16(3)).

View our CICA briefings here and here

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