For an insured, giving an early notification of “circumstances” under a claims-made policy would seem prudent. Issues can arise, however, when the facts are developing; the principles at play when trying to determine the scope of an early notification in these circumstances were usefully summarised in the Kajima decision. The key points are that the insured must be aware of the circumstances which it is notifying, and the claim which is later pursued must arise from the notified circumstances. The fact that the cause of a problem is not known at the time of the notification should not prevent a subsequent claim in respect of that problem falling within the scope of the notification, as long as the problem itself (ie the circumstances) has been clearly identified.
In Euro Pools, the court considered the scope of a notification under a claims-made professional indemnity policy, in relation to a problem identified with the insured’s pool equipment, which was initially notified in the first of two successive policy years. Although the issues were initially notified under the first policy year, further policy notification(s) were given when investigations subsequently revealed that the insured needed to replace, rather than simply to modify (as first thought), its defective pool-boom system. It was held that because, at the time of the first notification, the insured was not aware of the precise nature or cause of the problems which subsequently emerged, these had not initially been notified. The later (and more expensive) issues were held to have been validly notified to the second policy year.
The approach taken in Euro Pools seems to have been to apply the Kajima principles very restrictively. This has the potential to encourage less precise, broader notifications. The decision does, however, highlight the need to consider the precise wording (and scope) of any notification very carefully.
Our article here looks in more detail at the general principles governing notification of “circumstances” and the court’s decision in Euro Pools.
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