Ashcombe Structural Engineering: a claim that falls between two policy years
Ashcombe Structural Engineering Ltd has turnover of £3.1m and a professional indemnity policy with a £2m limit, written on a claims-made basis for periods running 1 April to 31 March. The wording requires the insured to give written notice 'as soon as practicable of any circumstance of which it becomes aware which may give rise to a claim'. It also excludes 'any claim arising from circumstances known to the insured prior to the inception of this policy'.
In November 2023, during the 2023/24 policy, the managing director received a site report showing excessive settlement of a car park slab at a supermarket completed in 2021. At a renewal meeting on 18 March 2024 he mentioned orally that the firm had 'a couple of site issues'. Renewal was completed for 1 April 2024.
On 22 July 2024 the supermarket's solicitors claimed £340,000. The firm gave written notice on 29 July 2024. The 2024/25 insurer declines, citing prior knowledge. The 2023/24 insurer cites late notification, some seven months after the report, and says it has been prejudiced.
1. Which policy year responds to the supermarket's claim, and why?
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Start with the trigger. This is a claims-made policy, so cover is triggered by the making of a claim - or, under a deeming provision, by the notification of circumstances - during the period of insurance. It is not triggered by the date of the negligent design or the construction works.
The claim was made on 22 July 2024, within the 2024/25 year, and written notice followed on 29 July 2024. On the face of it, the 2024/25 policy responds.
But that policy excludes claims arising from circumstances known to the insured before inception. The managing director knew in November 2023, from a site report showing excessive settlement, that a claim was a real possibility rather than a fanciful one. That knowledge is the company's. The exclusion therefore bites, and the 2024/25 insurer can decline.
That pushes the claim back to 2023/24. Most PI wordings contain a deeming provision allowing circumstances notified in one period to be treated as a claim made in that period, so that a later claim arising from them attaches to that year. Whether that helps depends on whether there was a valid notification during 2023/24. The oral remark on 18 March 2024 is the pivot: if it was not a notice, and no written notice was given, the deeming provision is not engaged.
The answer therefore turns on two documents - the deeming provision and the notice clause - and on how the 18 March conversation is characterised. If neither route works, the claim falls between the two years, which is the worst outcome for the insured.
2. Can the 2023/24 insurer rely on late notification? Address condition precedent, prejudice, s.11 and the oral remark.
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Notification clauses were deliberately left outside the Insurance Act 2015 reforms, and s.11 does not rescue the insured. Section 11 applies to terms designed to reduce the risk of loss of a particular kind, at a particular location or at a particular time. A notification clause is not a risk-reduction term; it is a claims-handling obligation, so s.11 is not engaged.
The wording decides it. If notification is expressed as a condition precedent to liability, breach means the insurer is not liable, whether or not it suffered prejudice - that is what a condition precedent does. If it is a mere condition, the insurer must show prejudice: lost opportunity to investigate while the slab was accessible, to control the defence, or to set reserves early.
The oral remark. Most wordings require notice in writing, although notice to the broker is frequently deemed to be notice to the insurer, and a notice need not follow a prescribed form if it conveys the substance. 'A couple of site issues' identifies no project, no defect and no potential claimant. It is very unlikely to satisfy a requirement to identify circumstances which may give rise to a claim. It is a warning flag to the broker, not a circumstance notice.
Prejudice is real. By July 2024 remediation works had been completed, the slab was covered, and the site engineer had left the firm. The insurer lost the best evidence at the point when it could have been preserved.
Declinature is defensible on either limb, but the insurer should still be ready to evidence prejudice and to explain why the renewal conversation was not treated as notice at the time.
3. What should the broker have done at the 18 March 2024 renewal meeting, and what position does the firm now face?
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The broker heard, in a renewal meeting, that there were 'site issues' on completed projects. A competent broker familiar with a claims-made wording should have recognised a potential circumstance, asked what the issues were, and either submitted a written circumstance notice to the 2023/24 insurer before expiry or recorded advice and the client's instructions not to notify. Either course would have preserved the firm's position.
If the broker did neither, the firm may have a negligence claim, but recovery will be reduced for contributory fault: the director knew of the November 2023 report and chose not to notify for eight months, and his account to the broker was deliberately vague.
Immediate steps: obtain the full broker file and the meeting notes; check the policy for a deeming provision and for the definition of a notifiable circumstance; and put the point to the 2023/24 insurer that notice was in substance given. The firm is a company, so Financial Ombudsman Service eligibility is unlikely; expect negotiation, mediation, or proceedings.
For the future, the firm should notify the current year's insurer of the claim, disclose it at the next renewal, and adopt a written circumstance log reviewed at every renewal.