Effect of insurer’s rejection of claim

Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd and another CA TLR 9 February

The defendants were public liability insurers disputing which was liable for injury to a man who had died from mesothelioma resulting from exposure to asbestos on a Bolton Council building site in the 1960s. The fact that one of the insurers, the Commercial Union, had rejected the claim on the ground of lack of cover did not constitute a waiver of the possibility of pleading a breach of condition at a later stage if the breach had occurred prior to the rejection of the claim. The insurance policy required Bolton as a condition precedent to a claim to give prompt notice of it, which it had failed to do, largely because it had rightly regarded the other insurance company as the liable insurer. The court approved the formulation of the principle in paragraph 26–4D(c) of Clarke’s The Law of Insurance Contracts (1999): ‘If the insurer rejects the claim altogether on another ground such as lack of cover, the insurer does not thereby waive the possibility of pleading a breach of condition at a later stage, if that breach occurred prior to the rejection of the claim.’