Insurers, Beware The Duty To Speak!

The English Court of Appeal recently decided that an insured which did not provide its insurer with reasonably required quantum documents had not breached its claims obligations because the insurer had a duty to tell the insured that the documents were outstanding. South African insurers should be wary that their conduct (even by silence or inaction) may, in appropriate circumstances, similarly prevent them from relying on apparent breaches of claims obligations by their insureds.

In Ted Baker PLC and Another v AXA Insurance UK PLC and Others [2017] EWCA Civ 4097, the court considered an appeal by the insured following the lower court upholding the insurer's rejection of a claim for business interruption losses arising from theft by an employee over a prolonged period of time. The lower court upheld the rejection for a number of reasons, one of which was that the insured had breached a condition precedent to the insurer's liability by not providing certain quantum documents which had been requested by the loss adjuster appointed by the insurer. The relevant claims conditions read that "in the event of a claim being made under this section the insured at their own expense shall deliver to the company such books of account and other business books, vouchers, invoices, balance sheets and other documents, proofs, information, explanations and other evidence as may be reasonably required by the company for the purposes of investigating or verifying the claim" and that "if the terms of this condition have not been complied with no claims under this section shall be payable".

It was common cause that the quantum documents fell within the type of documents the insured had to provide under the claims conditions and that such documents had not been furnished.

In the circumstances, the insurer argued that the insured could not persist with its claim. In response, the insured argued that the insurer was precluded from raising this argument due to estoppel and...