Facts
The defendant insurers insured Fast Track Projects Ltd against liability to pay compensation for any loss or damage to equipment under hire. In July 1997, Fast Track hired plant from George Hunt Cranes. That September, the jib and boom of one of the cranes was damaged, leaving Fast Track liable for £17,248.

George Hunt promptly wrote a letter to Fast Track, setting out their claim, but Fast Track failed to notify their insurers, who only learned about the claim when George Hunt wrote directly to them the following January, whereupon insurers denied liability. Fast Track went into voluntary receivership in March 1998.

Under the Third Parties (Rights against Insurers) Act 1930, all Fast Track's rights as an insured against its own insurers automatically transferred to George Hunt on the liquidation, but, nevertheless, insurers could only be pursued after judgment against Fast Track had been obtained. George Hunt duly issued proceedings and obtained judgment in default.

The defence to the claim was that Fast Track was in breach of a notification provision, which, insurers argued, was a condition precedent to their liability under the policy.

The clause in question provided that the insured had to give immediate notice in writing of any loss or damage which might give rise to a claim and "the Insured shall within thirty days after such loss, destruction or damage, accident or injury…deliver to the Company a claim in writing containing as particular an account as may be reasonably practicable of the accident, injury or any portions of the Plant lost, destroyed or damaged and of the amount of damage…No claim under this policy shall be payable unless the terms of this condition have been complied with".

Judgment
The Court of Appeal agreed with the judge at first instance that the wording of the notification clause and the intention behind it were wholly unambiguous. The effect of the last sentence – "No claim under this policy shall be payable unless the terms of this condition have been complied with" - was to make the provision a condition precedent to insurers' liability. Its purpose was obvious - to ensure that insurers would be given sufficient information to decide on coverage issues and to investigate the claims - and the effect of non-compliance could not have been put more clearly.

The fact that the clause did not use the term "condition precedent" was neither here nor there as the Court will always look behind such labels (or lack of them) and consider the clause in the context of the policy as a whole.

Comment
The case demonstrates once again the value of using clear, straightforward language in insurance policies.

Another point worth noting is that, if the Law Commission's proposals for a new Third Parties (Rights against Insurers) Act are adopted, a third party in George Hunt's position would be able to pursue insurers after a triggering event (such as the insured's liquidation) without first having to issue proceedings against the insured.

In the present case, this would have saved some time and expense, but the proposed new Act would probably have had little effect on the outcome, as insurers would still be able to rely on the same defences they could have raised against the insured. Where, however, insurers have a notification defence of a purely technical nature (such as a failure to notify in circumstances where the only reason the insured could not do so was because it had already gone into liquidation) the new proposals would allow the third party to give insurers valid notice of a claim once the insured's rights against insurers have transferred.