Notification and circumstances clause — UK PI
The notification-and-circumstances clause is one of the most consequential in any PI wording. Understanding it well is the difference between a covered claim and an uninsured loss.
What the clause says
The insured must notify the insurer of any 'claim' or 'circumstance likely to give rise to a claim' — as soon as reasonably practicable, or within a specified deadline (often 30 days).
A 'circumstance' is defined broadly — any facts suggesting a possible claim.
A 'claim' includes formal demands, threats of proceedings, and sometimes third-party requests suggesting one is coming.
The clause typically requires written notification via the broker or direct.
What triggers the obligation
- Written complaints from clients suggesting professional error.
- Third-party demands for compensation.
- Threats of legal action.
- Awareness of material errors or omissions in past advice.
- Regulator investigations relevant to the advice given.
- Adverse findings in tribunals or ombudsman schemes.
Consequences of late notification
Insurer can decline cover for the specific claim (or related claims).
Multiple late notifications can affect renewal terms and premium.
Insurer may pursue 'prejudice' argument — showing the late notification actually harmed their defence.
Fair-presentation duty under Insurance Act 2015 adds separate consequences.
Regulatory implications where the underlying issue involves regulatory duties.
Practical notification discipline
- Notify anything on the borderline — the downside is minimal, the upside is preserving cover.
- Notify via the broker in writing.
- Preserve the file completely at the point of notification.
- Do not communicate with the potentially affected client about the notification without insurer consent.
- Follow up with the insurer where they haven't confirmed receipt.
- Document the notification in your risk register.