Supermarket slip-and-fall: late notification, admission and a contractor indemnity
On 14 November a customer slipped on a wet floor at a supermarket and fractured her wrist. The store manager recorded "our cleaner left the floor wet and no warning sign was put out - our fault" in the incident report and paid her CNY 3,000 from petty cash for taxis. The insurer was notified on 2 April, when the customer's solicitor demanded CNY 480,000. The public liability policy is occurrence-based with a limit of CNY 5,000,000 and a CNY 10,000 each-and-every-claim deductible, and requires notification "as soon as practicable", no admission of liability without the insurer's written consent, and full cooperation. The cleaning contract with SparkleClean contains an indemnity in the store's favour and requires cover of CNY 2,000,000. SparkleClean's insurer has declined its claim, alleging breach of a safety-procedure warranty because no warning sign was used; SparkleClean's directors say the company has net assets of about CNY 150,000. The customer's medical costs are CNY 85,000, lost earnings CNY 120,000, and general damages are estimated at CNY 100,000 to CNY 160,000.
1. Advise on the coverage position created by the late notification and the manager's conduct.
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Late notification. Four and a half months is late, but the starting point is that this is an occurrence-based policy: the claim is covered by the policy in force on 14 November regardless of when it was reported. The notification clause is "as soon as practicable" - an innominate term in most modern wordings - so the insurer must normally show prejudice before it can decline. Identify the prejudice concretely: CCTV may have been overwritten after 30 days, the floor and any sign are long gone, the cleaner may have left, and witnesses have scattered. If that evidence is lost, a proportionate reduction or a declinature may be defensible; if the store preserved the incident report, cleaning schedule and witness details, it is much weaker.
The admission and the CNY 3,000. Both breach the no-admission condition. The payment is small and is not conclusive proof of liability in law, but the manager's written words are powerful evidence against the insured and were created before any investigation. The condition affects the insurer's control of the defence rather than the existence of cover, so the correct response is a reservation of rights - not an immediate declinature.
Recommended position. Formally reserve rights on both grounds, take over the defence under reservation, investigate prejudice, and tell the insured in writing that the uninsured consequences of its own breach are its own. If prejudice is demonstrated, a proportionate reduction is more defensible than a total denial.
2. Set the initial reserve and outline the liability, quantum and recovery strategy.
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Reserve. Build it from heads of loss:
- Medical costs: CNY 85,000
- Lost earnings: CNY 120,000
- General damages: midpoint of CNY 100,000–160,000, say CNY 130,000
- Subtotal: CNY 335,000, plus defence and investigation costs of, say, CNY 60,000 and a risk margin → an initial gross reserve of about CNY 430,000, less the CNY 10,000 deductible.
Add a separate small reserve for the coverage dispute, because the reservation of rights may generate its own costs.
Liability. A wet floor with no signage gives a strong prima facie claim. In most regimes the occupier owes a personal, largely non-delegable duty to visitors, so SparkleClean's negligence does not necessarily reduce the store's liability to the customer - it creates a separate right of contribution. Expect the store to seek to blame the contractor; expect the court or the claimant to look at the store's own inspection regime and cleaning supervision.
Recovery. Enforce the contractual indemnity and require SparkleClean to notify its own insurer immediately. But do not net the recovery off the reserve: the safety-procedure warranty defence may succeed, and net assets of CNY 150,000 make the indemnity of limited practical value. Reserve the indemnity at nil and treat any recovery as a windfall.
Evidence to obtain now. CCTV, the cleaning schedule and sign-off sheets, the incident report, the manager's statement, medical records and the wage-loss evidence.
3. The insured wants to settle directly with the customer for CNY 300,000. Advise on the settlement, the conflict of interest and the effect on cover.
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Do not settle unilaterally. A liability policy gives the insurer the right to conduct the defence and settle. If the insured settles without consent it risks losing indemnity for the settlement, although the insurer generally remains liable for the amount it would have paid had it controlled the case. Advise the insured in writing that a private settlement, especially after the notification and admission breaches, gives the insurer its strongest argument yet.
Practical route. Ask the insurer to grant settlement authority at or near CNY 300,000, supported by the medical and earnings evidence. Given a likely exposure around CNY 335,000 plus costs, CNY 300,000 is within a sensible range and may be cheaper than defending a case weakened by the manager's admission. If authority is refused, the insurer should confirm clearly what it will indemnify so the insured can decide with open eyes.
The conflict. The insurer's interest in using the breaches to reduce or decline the claim is adverse to the insured's interest in a funded settlement. Where a reservation of rights exists, tell the insured it may instruct independent counsel at its own cost and that the insurer's panel solicitors act for the insurer, not for the insured personally.
If settlement proceeds. Apply the CNY 10,000 deductible, preserve subrogation against SparkleClean (no release of third parties in the settlement agreement), and record expressly that the settlement is without admission of liability so it is not used against the insured elsewhere.