In this action for declaratory relief, the UK Court of Appeal issued a judgment on the construction and application of notification provisions in a claims made policy, which may be of interest in interpreting similar provisions in reinsurance agreements. The court held that where a professional indemnity insurance policy required the insured to notify the insurers of potential claims against the insured “as soon as practicable,” the insured could satisfy this requirement by notifying the underwriters of circumstances which might give rise to claims for professional negligence, if made within the insured period, even if the notification of the claim itself was not given until after the policy period. However, notification of such circumstances given after the policy expired relating to new potential claims was not effective.
The essential issue was whether Kidsons gave the underwriters effective notification of the circumstances that might lead to subsequent claims for professional negligence within the policy period. The policy provided no details as to how a notification was to be made, other than that it must be in writing and given as soon as practicable after awareness of circumstances which might give rise to a claim. This was a factual issue, requiring an analysis of various letters and presentations. The court held that the “as soon as reasonably practicable” language was, in effect, a condition precedent in the claims-made policy. This result was not undone by another policy provision stating that “Where the assured’s breach of or non-compliance with any conditions of this Insurance has resulted in prejudice to the handling or settlement of any loss or claim the indemnity afforded . . . shall be reduced to such sum as in the underwriters’ opinion would have been payable by them in the absence of such prejudice.” Although the provision referred to “any conditions of this Insurance,” it did not in terms refer to – and therefore modify – conditions precedent. One Justice dissented, agreeing with the judge below that the letter relied upon as providing notice of the circumstances was incapable of constituting an effective notification because it was too nebulous. HLB Kidsons v. Lloyd’s Underwriters  EWCA Civ 1206 (Ct. App. Nov. 5, 2008).
This post written by Brian Perryman.