Trade Credit Insurance: waiver of insurers’ rights
The Court has considered circumstances in which trade credit insurers might waive their rights to decline claims based on improper notice being given under the terms of their policy.
The case concerned claims on three credit insurance policies covering three sets of unpaid invoices. The credit insurers declined the claims alleging that the notices given in relation to the three claims were invalid. Compliance with the notice provisions was effectively a condition precedent to liability.
The complaints about the notices included allegations that they did not contain the correct information, and in particular were not accompanied by the correct documentation. The Court rejected these points.
The Court further concluded that even if the notices had been defective under the terms of the insurance, the insurer had waived its rights to complain about this.
Specifically, the Court held that:
•there were two sets of alleged defects in the notices;
•the first were defects in the form of the notices themselves, which were clear on the face of the notices. Secondly, there were inadequacies in which supporting documents were enclosed with the notices;
•insurers had been in possession of the notice of the first and second claims for a number of weeks when they wrote to the insured stating, amongst other things, that the board and counsel had been reviewing them and that they would pay the second call on the insurance;
•the Court concluded that this was a clear and unequivocal representation that no points would be taken on the form of, or enclosures with, that second call notice;
•the first notice was of exactly the same type as the second. The Court therefore considered that a reasonable person receiving that letter would have been entitled to assume that the insurers were adopting the same stance in relation to the first notice (i.e. no points would be taken);
•about 10 days after the third notice had been issued, the insurers wrote to the broker saying that if the insurers found that the debtor had not been fraudulent then they would honour and pay the claims. This again amounted to a waiver of any complaints about the form of the third notice or its enclosures.
The decision itself is not surprising on its facts. It is, however, another decision that serves to remind insurers that there are circumstances in which policy related defences (whether misrepresentation, non-disclosure or breach of policy terms) can be waived so that insurers can no longer rely on them.
This article first appeared in Law-Now, CMS Cameron McKenna's free online information service, and has been reproduced with their permission. For more information about Law-Now, click here.