Notification of circumstances under a professional indemnity policy
On 13 May 2019, the English Court of Appeal handed down its judgment in the Euro Pools case. The case represented the most important decision analysing notification of circumstances since HLB Kidsons v Lloyd’s Underwriters.
The full judgment is here.
KEY POINTS
The key points for a claims manager and claims brokers to take away from the case are as follows:
- A notification of circumstances clause that refers to circumstances that “may give rise” to a claim, presents a low bar for insureds. It means only that there is a possibility that claims may arise in the future (this can be compared to the higher test of “likely to give rise to a claim”) – para 39(ii) of judgment.
- A valid notification can include a “can of worms” or “hornet’s nest” notification i.e. a notification of a known problem, the exact scale and consequences of which are not known – para 39(iii) of judgment.
- Whilst an insured must be aware of the circumstances that are being reported, in order for a notification to be valid, it is not necessary for an insured to know or appreciate the cause, or all the causes, of the problems which have arisen, or the consequences, or the details of the consequences, which may flow from them – para 39(iv) of judgment.
- If there has been a proper notification of circumstances, any claim which arose consequently from the notified circumstances would arise from those circumstances but there must be some causal, as opposed to merely some coincidental, link between the notified circumstances and the later claim – para 39(v) of judgment.
PRACTICAL TAKEAWAYS:
A claims manager, faced with a broad “hornet’s nest” notification would be well advised to ask detailed and specific questions regarding the matters notified, to attempt to identify the cause(s) of the issue and thereby limit the scope of notification and the subsequent claims that may otherwise fall within the notification.
A claims broker, on the other hand, should for similar reasons resist any pressure for their client to speculate on the cause(s) of the issue where it is not clear.