The Court of Appeal has unanimously overturned the first instance decision in Euro Pools v RSA, holding that where a notification is given of circumstances which “might …be expected to produce a claim”, it is not appropriate to over analyse the problem notified. A notification of circumstances will be taken to cover the defects causing and the symptoms and consequences of the circumstances notified.
Notification of circumstances
Insureds are generally advised to give an early notification of “circumstances” under a claims-made policy. This may be more complex, however, when dealing with an evolving set of facts and ongoing investigations.
The principles to be applied when considering the scope of a notification of circumstances were summarised in Kajima UK Engineering Ltd v The Underwriter Insurance Company Ltd:
- “It is only circumstances of which the Insured is actually aware which can be the subject matter of a notification…The claim which is later pursued must arise not only from the notified circumstances but also only from the circumstances of which the Insured was aware”, and
• “There must be some causal, as opposed to some coincidental, link between the notified circumstances and the later claim.”
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.
Euro Pools v RSA
In our article here we examined the first instance decision in Euro Pools Plc. v RSA, in which the court considered the scope of a notification under a claims-made professional indemnity policy. The notification related to a problem identified with the insured’s pool booms, which were not rising and falling properly. 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.
At first instance, 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 with the booms which subsequently emerged, these had not initially been notified. We considered that decision to have been a very restrictive application of the Kajima principles, and, respectfully, that it confused the circumstance itself (a failure of the boom system due to some as yet unidentified design defect) with its cause. As we anticipated, the Court of Appeal has now unanimously overturned it, on the basis that the circumstances notified during the first of the two policy years was the problem with the booms (which were failing to rise and fall properly), and it is not appropriate to overanalyse by dissecting every potential cause of the problem.
Euro Pools’ obligation was to notify of circumstances which “might reasonably be expected to produce a claim”. The Court of Appeal reviewed key authorities and summarised the principles as being:
- a provision requiring notifications of circumstances which “may” give rise to a claim only requires the possibility of claims in future
- a notification need not be limited to particular events, but can be a “hornets’ nest” notification - there may well be uncertainty at the time of notification as to what the precise problems or potential problems are, and
- the insured does not need to know the cause, or all the causes, or the consequences, of a problem.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.