London Market - August 2010

Notification, Date of Material Damage

Loyaltrend Limited v Brit UW Limited [2010] EWHC 425 (Comm)

The claimant, a fashion retailer, brought a claim for property damage and business interruption under an insurance policy arising from subsidence affecting its retail premises in Notting Hill (“the Shop”).

Structural problems with the Shop arose from mid 2003 and continued until at least 2006. During this time the claimant’s brokers arranged insurance coverage which, unbeknownst to the claimant, was with three separate companies who each insured the premises over separate periods.

The claimant discontinued the proceedings against the companies who had insured it at the beginning and end of this period and decided to pursue only the defendant, Brit UV Limited (“Brit”), which had insured the claimant from 11 December 2003 to 10 December 2004.

The main issue in dispute was when the event causing damage had occurred.

Signs of subsidence were first reported to the Shop’s landlord in the summer of 2003 while the claimant was insured by Creechurch Dedicated Limited. The landlord’s agent, Farley, inspected the Shop and found cracks to the front of the building and movement to the public pavement in front of the shop. By November 2003 the situation had deteriorated significantly. The landlord’s insurer, AXA, was notified but the claimant did not notify its own insurer.

Over the next three years the subsidence continued to worsen and led to considerable water damage and dampness within the Shop. Various repairs were undertaken to the exterior by the landlord and to the interior by the claimant.

In August 2004, the claimant made a claim under the Brit insurance policy for the repairs to the Shop interior, business interruption loss and damaged stock. Brit denied liability due to a breach of a condition precedent by the claimant namely General Condition 5 which provided that the claimant must, “give immediate notice to the Insurers… on the happening of any injury or damage in consequence of which a claim is or may be made”.

The claimant argued that it did not have a duty to notify Brit until the subsidence damage became serious and had the potential to cause loss. It claimed that this did not occur until August 2004 and at this time Brit was informally notified.

Judge Mackie QC held that:

1. The test for whether a claim ‘may be made’ was objective.
2. There was no evidence to support the claimant’s assertion that notice was given to Brit in August 2004.
3. In any event the claimant’s obligation to notify Brit arose in November 2003 as the seriousness of the damage was apparent at this time.
4. Brit was not liable under the insurance policy as the claimant had failed to comply with the condition precedent as to notice.

Judgment for the defendant.