Circumstances vs Claims: What to Notify and When

Every UK PI policy in the regulated market is written on a claims-made basis. That means the cover is triggered by the date of notification, not the date of the alleged negligence. Within that architecture sits a second mechanism that buyers routinely underuse: the right to notify a circumstance that may give rise to a claim. Used properly, this mechanism locks coverage into the current policy year even if the formal claim does not land for two more renewals. Used badly — or not at all — it leaves a firm exposed when the claim eventually arrives and the insurer points to a notification gap. This guide sets out the distinction, the statutory backdrop, and how to operate it in practice.

What this means in practice

A “claim” is a written demand for compensation or an intimation of an intention to pursue one. The bar is low: a letter from a former client’s solicitor saying “our client reserves the right to recover losses” is a claim. So is a Land Registry rectification notice that asserts a conveyancer made an error. So is an adjudication referral. The unifying feature is that a third party has expressed, in writing, that they hold the insured responsible for something.

A “circumstance” is anything that the insured knows about which might reasonably be expected to give rise to a claim. The threshold is materially lower than the threshold for a claim. There need not be a third party demanding anything; there only needs to be an awareness that something has gone wrong, or might have gone wrong, and that a complaint, demand or proceeding could follow.

In practice the circumstance category catches:

• An internal file review that flags a missed limitation date.
• A site meeting where the contractor blames the designer for a defect.
• A client email that, while not yet hostile, raises concern about advice given two years ago.
• A regulator opening a file on a transaction the firm advised on.
• A junior fee-earner leaving and saying, on the way out, that two of their files “need a second look”.

The judgement call is whether the awareness rises to the level of a circumstance that might reasonably be expected to lead to a claim. The right answer is almost always to notify and let the insurer record it. The wrong answer is to wait and see, because in PI the wait-and-see approach interacts badly with the claims-made trigger and with the duty of fair presentation at renewal.

How the cover usually responds

Once a circumstance is notified in writing during the period of insurance, the policy treats any claim that subsequently arises from that circumstance — whenever it arises — as having been made during the policy year of notification. This is the deeming provision, and it is the single most valuable feature of the circumstances mechanism. It locks in the limit of indemnity, the terms, and the retroactive date of the year in which the notification was made.

The Solicitors Regulation Authority Minimum Terms and Conditions of Professional Indemnity Insurance, at clause 5, set out the notification framework solicitors’ insurers must accept. Notification of either a claim or a circumstance during the policy period is sufficient to engage cover. The RICS Professional Indemnity Insurance Minimum Approved Wording contains an equivalent mechanism for chartered surveyors. ARB-regulated architects, ICAEW-regulated accountants and BIBA member brokers all operate under wordings with broadly the same architecture, though without minimum terms quite as prescriptive as the SRA regime.

Two statutory provisions sit behind this. The Insurance Act 2015, section 3, imposes a duty of fair presentation at inception and renewal. Material circumstances that the insured knows about, or ought to know about, must be disclosed. A circumstance that has crossed the threshold of “might reasonably be expected to give rise to a claim” is almost certainly a material circumstance for renewal purposes. Failure to disclose it engages the remedies in section 8 — proportionate remedies for non-deliberate breach, avoidance and premium retention for deliberate or reckless breach. The second provision is section 7, which defines the insured’s knowledge: a body corporate must disclose what its senior management and those responsible for the insurance know.

Practically, this means a firm that sits on a circumstance and renews is running two risks. First, the new insurer can decline a later claim arising from the circumstance because it is a known circumstance not disclosed at inception. Second, the prior insurer can decline because no notification was made during its year. Both insurers point at each other and the insured is in the middle.

Claims-made cover against occurrence cover

What has to be notified, and when, follows directly from the claims-made trigger set out below.

Sources: ARB PII Guidance paras 6.1–6.2 on the claims-made basis and run-off (arb.org.uk); RIBA Guide to Professional Indemnity Insurance 2024, glossary entry “Claims Made” (riba.org); SRA Minimum Terms and Conditions clause 5.4 on six-year run-off (sra.org.uk).

Common mistakes

1. Treating “I think this will go away” as a substitute for a notification. The market does not reward optimism; it rewards a contemporaneous note in the insurer’s file.
2. Notifying verbally to the broker and assuming this is enough. A circumstance is notified when the insurer receives written notice. The broker’s role is to relay it promptly and to confirm receipt.
3. Drafting the notification in a way that overstates liability. The notification should describe the facts, not concede the case. Avoid words like “negligence”, “breach” or “error” when “concern”, “issue” or “matter raised” will do.
4. Notifying only the file the client has complained about, when an internal review suggests the same issue may affect other files. A category notification — sometimes called a “blanket” or “matters arising from” notification — is appropriate where there is a pattern.
5. Forgetting that a circumstance notified in year one can give rise to a claim in year four, and that the relevant limit, deductible and retroactive date are those of year one — not the current year.

Worked example

A mid-sized surveying practice with a GBP 2,000,000 limit of indemnity and a GBP 25,000 each-and-every-claim excess receives an email in February 2026 from a developer client. The developer has discovered a discrepancy between the valuation prepared by the practice in 2023 and the valuation prepared by a competing firm in 2025. The email is polite but says “we are reviewing our position”. The practice’s compliance partner reviews the file, identifies that two comparables were arguably misapplied, and concludes there is a real prospect of a claim.

The practice notifies the circumstance to its insurer the same week, attaching the email and a one-page factual chronology. The insurer records the notification under the 2025/26 policy year. No formal claim is made until October 2027, when proceedings are issued for GBP 850,000. The claim is handled under the 2025/26 wording and limit, even though the practice has by then changed insurer twice and is paying a higher premium on a tighter limit. The deductible is GBP 25,000. Defence costs erode the limit because the 2025/26 policy was costs-inclusive. Settlement is reached in 2028 for GBP 500,000 plus GBP 180,000 defence costs, well within the GBP 2,000,000 limit. Had the practice failed to notify, the 2027 claim would have hit the 2027 policy with a known-circumstance argument from the new insurer and no fallback to the prior year.

What to do at renewal

Notification practice and renewal discipline are the same workstream. At renewal:

1. Run a structured file review covering matters where a client has expressed dissatisfaction, where a regulator has opened a file, where an internal review has flagged a concern, and where a key fee-earner has left in the past 12 months.
2. Notify any circumstance identified before the renewal date, even if the renewal proposal form has not been signed. A pre-renewal notification preserves cover under the expiring policy.
3. Disclose all notified circumstances on the renewal presentation. Fair presentation under the Insurance Act 2015 section 3 requires it, and any attempt to soft-pedal a known matter is exactly the risk section 8 is designed to penalise.
4. Where the insurer is changing, brief the broker on every open notification and confirm in writing which year each notified matter sits in. The new insurer should never be in a position to argue that a known matter was tucked into the proposal.
5. Ask the broker to confirm receipt of every notification in writing. Insurer email systems lose things, and the burden of proving notification was made sits with the insured.

What the Insurance Act 2015 requires at a PI proposal or renewal

Renewal is where notification and disclosure meet: the statutory duty that applies at that point is set out below.

Source: Insurance Act 2015 s.3 (legislation.gov.uk). Remedies for breach are set out in Schedule 1 to the Act and depend on what the insurer would have done had a fair presentation been made.

Apex’s view

Apex’s view: the firms that come unstuck on PI claims are rarely the ones with the worst underlying errors. They are the ones who treated a circumstance as a maybe and the renewal proposal as paperwork. We tell every client the same thing. If the question “should we notify this?” is being asked, the answer is yes. The notification costs nothing and locks in the cover. The non-notification can cost the whole claim. Get the file note, write the email, send it through the broker, and get the insurer’s reference number on record before you do anything else.

See also

• Late notification: can your insurer walk away?
• PI notification: what to do in the first 48 hours
• Material circumstance
• Claims-made trigger
• Fair presentation

Sources

1. Insurance Act 2015, sections 3, 7 and 8
2. Solicitors Regulation Authority Minimum Terms and Conditions of Professional Indemnity Insurance, clause 5
3. RICS Professional Indemnity Insurance Minimum Approved Wording (current edition), notification clause
4. FCA Handbook, MIPRU 3.2 (PI requirements for insurance intermediaries)