A problem shared is a problem halved

As a profession, we are reasonably good at notifying our insurers of potential professional negligence claims against us in a timely manner. However, we are also reluctant to accept criticism (after all, we are all experts in our fields) and so late notification issues can and do arise. As solicitors, we deal with time pressures on a daily basis for our clients, so why are some of us so slow to respond when the shoe is on the other foot?

One of the most common explanations that insurers hear is “well, the claim doesn’t have any merit”. This carries little weight as modern systems, like Money Claim Online, make it very easy to issue a claim and
a litigant in person may do so with little consideration of the prospects of success. Litigants in person are another matter with which we are all too familiar, but that’s a topic for another day.

It seems obvious that a formal letter of claim, or claim form, ought to prompt notification. However, professional indemnity policies also require notification of ‘circumstances’. This has a tendency to cause uncertainty as to what should be notified to insurers and, importantly, when.

So what is a circumstance?
It is often described as a ‘fact, matter, act or omission which may give rise to a claim in civil litigation’. This may be a little technical but, in essence, we are talking about situations where
a client indicates an intent to claim or, crucially, where you become aware of a potential breach of duty, even if the
client is not aware.

A timely notification is important because it provides an opportunity to investigate the claim, and often it can help to have someone look at a claim objectively at an early stage. It also allows insurers to consider strategy from the outset, and avoids a situation where our first correspondence with the other side is to request an extension of time.

So, what are the consequences of late notice? First, solicitors are lucky as their minimum terms and conditions of professional indemnity insurance (PII) provide generous cover – very generous cover. Other professionals are not so lucky and run the risk of dealing with a claim without cover. The main risks arising out of late notification are that insurers
will seek reimbursement, or
that there will be delays which could cause prejudice to your position.

Issues with late notification also regularly crop up with claims that arise around the time of policy renewal. Where
a late notification causes the claim to fall into a different policy year, the current insurer may be inclined to direct it to their predecessor. This invariably causes delays
and complications which are unlikely to assist in resolving
a dispute.

But there is a wider application here. Those with commercial clients, who are likely to possess professional indemnity and/or directors and officers insurance, should also bear their client’s notification requirements in mind. There may be circumstances in which it is appropriate to advise their client to notify their insurer of a potential claim. Failure to give prompt advice in this regard may result in a claim being pursued by your client.

Here are some tips to set you on the right path:

• Ensure you are familiar with the requirements of your insurance policy regarding notification of claims or circumstances which may give rise to a claim. It sounds basic, but read your policy.
• It is better to be over-cautious. If you are uncertain whether an issue ought to be notified, discuss the matter with your broker or insurer.
• Don’t ignore a potential claim because you think it has no merit, and don’t let it fester in the deepest, darkest recess of your desk. SJ