Its an interesting topic from a policy holder point of view, should you report the possible third party insurance claim you will most likely get penalised for loss of no claim discount, on the other hand should you not report the incident to your insurer you could find yourself with a major problem on your hands.
For an insurer to repudiate a claim on the basis of late notification alone would appear harsh however it is possible due to the fact some of the information that would be required to ascertain if they are liable may not be available.
When we consider the ruling of Milton Keynes Borough Council v Michael Nulty and Others (2011)
The Background was, Mr Nulty, a self-employed electrician, caused damage to a third party’s premises while working. He did not report the incident to his insurers, when the third party initiated a claim against McNulty he reported it to his insurers and expected them to deal with the claim. however, his insurers disagreed and alleged that his delay seriously hampered their investigation and that they we unable to look for other possible causes to the fire. They alleged a failure to report the incident breached the terms and conditions of the policy and refused to deal with the claim.
Ruling. The courts in adjudicating the case acknowledged that while Mr McNulty’s actions prejudiced insurers ability to investigate the case, the insurer should not be able to avoid their responsibilities under the policy. They ordered the insurers to pay 85% and Mr McNulty 15%. Despite the courts ordering the insurer to pay the majority, it left Mr McNulty with a significant exposure with the damages running into millions of pounds due to his failure to notify his insurers in a timely manner.
Each insurance contract can be different therefore generalised policy wording isn’t relevant, what most policies will suggest is that “all circumstances which might give rise to a claim” should be notified to us without delay, the reasons for that could include,
- It generally enables the insurer to take steps to investigate claims (or occurrences which might give rise to claims) in a timely manner and assess its exposure at the earliest opportunity.
- It generally allows the circumstances to be investigated so that detailed evidence is not lost.
- It gives insurers the opportunity of investigating possible recoveries from third parties and for important physical evidence to be retained.
- It enables the insurer to advise a broker and policyholder of a possible policy limitation at an early stage.
Under section 76 (1) of the road traffic act a third party insurance claim due to road traffic accidents are to be paid however if there is a breach of a policy condition it could result in an insurance company attempting to recover the payment for the claim against the policy holder.
Should you have a third party insurance claim, please contact us today as breaching a condition within your insurance contact could be expensive.