Category: Specialist underwriting · Reviewed by Jake Leat, Associate Director · Last reviewed May 2026
A mid-sized technology consultancy partnership received a stiff letter from a former client in late 2024 alleging that a 2021 system migration had caused two years of compounding data integrity failures. The senior partner read it, asked the engagement lead to draft a defensive response, and quietly set a calendar reminder to raise it at the next risk meeting. By the time the matter was formally notified to insurers, two policy renewals had passed and the alleged loss had crystallised at roughly £1.4 million. The current insurer declined cover on the basis that the circumstance had been known and not notified at the previous renewal; the prior insurer declined on the basis that notification had not been made during its policy period. The recoverable claim moved from £1.4 million to nil. Nothing in the underlying defence was weak. The failure was procedural — and it is a failure repeated across the UK professional services market with depressing regularity.
Professional indemnity insurance in the UK is overwhelmingly written on a claims-made and notified basis. Cover responds to claims first made against the insured, and circumstances first notified to the insurer, during the policy period. The trigger is not the date of the alleged negligent act, nor the date the client suffered loss; it is the date of notification. That single procedural mechanic means that the act of notification — its timing, its content, its addressee and its routing — controls whether a £2 million claim is met or refused.
The Insurance Act 2015 reformed many aspects of UK insurance law, including the duty of fair presentation and the consequences of breaching warranties, but it left the claims-made trigger structurally intact. Section 10 abolished basis-of-contract clauses and provided that a breach of a term not relevant to the actual loss should not entitle the insurer to refuse the claim. That is a meaningful shield in some contexts. It does not, however, rescue a firm that has fundamentally missed the notification window. The principle remains: no notification, no cover.
What follows are ten of the most common — and most costly — notification mistakes seen across the UK PI market.
Most PI wordings require notification “as soon as practicable”, “as soon as reasonably possible” or within a specified number of days. The temptation to delay — to investigate first, to attempt a commercial resolution, to wait for the complainant to escalate — is almost always misjudged.
The leading authority on what amounts to a notifiable circumstance is HLB Kidsons v Lloyd’s Underwriters [2008] EWCA Civ 1206. The Court of Appeal confirmed that a “circumstance” is something more than the insured’s general anxiety about its business; it requires an awareness of a specific matter that may give rise to a claim. The court was clear that once the test is met, the policyholder must notify in accordance with the wording — and that the test is objective. A partner’s private belief that a complaint is unmeritorious does not pause the clock.
Where the wording uses “as soon as practicable”, the courts have generally interpreted this as a reasonable period in the circumstances, not an indulgence. Where the wording specifies a fixed number of days, that period applies. Specialist brokers will routinely flag both the trigger and the deadline in placement memoranda, and prudent firms diary the deadline from the moment the issue is recognised.
This is the most common — and most catastrophic — error among firms that move insurers regularly. A circumstance becomes apparent in February. The firm renews in March, with a new insurer. The notification is made in April, to the new insurer. The new insurer declines on the basis that the circumstance was known before inception; the old insurer declines on the basis that notification was not made during its period of cover.
The claims-made trap is procedural, not substantive. The remedy is to notify the outgoing insurer before renewal — and to disclose the matter to the incoming insurer in the fair presentation. Brokers familiar with the run-off interaction between sequential insurers will normally insist on a pre-renewal notification audit precisely to avoid this fracture.
Most PI wordings draw a careful distinction. A “claim” is an actual demand for compensation or assertion of legal liability. A “circumstance” is something that may give rise to a claim. The two have different procedural consequences: notification of a circumstance generally crystallises that policy year for that matter (the so-called “first-stamp” or “deeming” rule), regardless of when the claim itself ultimately arrives.
Firms routinely mis-classify. A formal letter before action gets called a “circumstance”; a vague client complaint gets called a “claim”. The classification matters because it dictates which clause in the policy is engaged, which proof and information is required, and how the matter is treated at renewal. A broker advising on the notification will normally confirm in the covering letter which limb of the policy is being engaged.
A complaint about one transaction often unmasks a pattern. A negligent valuation in one report points to a methodology used across a portfolio of reports. A drafting error in one contract was carried into a template used dozens of times. Where the wording contains an aggregation clause linking matters arising from a single source or originating cause, the related matters should be notified — and notified together — so that the insurer can consider aggregation and so that cover is preserved across the wider exposure.
Notifying only the headline matter leaves the firm exposed when the second, third and fourth instances surface later, frequently in a subsequent policy year where the new insurer takes the position that the circumstances were known and not disclosed.
Firms frequently want to “get to the bottom of it” before involving insurers. The instinct is understandable; the execution is fraught. An internal investigation conducted without insurer engagement may produce documents that are not subject to litigation privilege, that are discoverable in subsequent proceedings, and that prejudice the defence. Worse, the delay in notification may itself breach the policy.
Equally relevant is the duty of fair presentation under the Insurance Act 2015. If an investigation is under way at renewal and findings are not disclosed, the insurer may seek to invoke the proportionate remedies in Schedule 1 — including avoidance for deliberate or reckless breach, and proportionate reduction of cover for other breaches. The safer course is to notify, then investigate under the protection of the policy and with insurer-appointed solicitors instructed appropriately.
The “minded to” question — at what point a firm is “minded to” notify — has been examined in cases including Kajima UK Engineering v Underwriter Insurance Co Ltd [2008], where the court considered notification under a different wording structure but reinforced the general principle that notification must reflect the firm’s institutional awareness. A casual email from a junior associate flagging a complaint to a broker may not meet the policy’s notification requirements; equally, an unauthorised notification may bind the firm to a position it has not properly considered.
The practical answer is governance. Most well-run firms have a named partner or director responsible for insurance notifications, a standing template, and a sign-off protocol. The broker’s role is to insist on that protocol, not to accept whatever lands in their inbox.
PI policies typically specify a notification address — sometimes the insurer direct, sometimes the placing broker, sometimes a named claims handler. Notifying via the wrong channel can, on a strict reading, be invalid notification. The risk is acute on layered programmes where each excess layer has its own placing broker and notification address, and on schemes underwritten via a coverholder where notifications must travel to the binding authority manager.
The Insurance Act 2015 provides some protection where the term breached is not relevant to the actual loss, but firms should not rely on retrospective rescue. The simple discipline is to notify the broker who placed each layer, in writing, with a written acknowledgment back, and to confirm in the notification letter which insurers are being notified.
A notification that begins “we are notifying purely as a precaution and do not believe any claim will materialise” is, in legal terms, still a notification — but the hedged language can create downstream problems. It may invite the insurer to record the matter as a watch-list item rather than a notified circumstance. It may complicate the firm’s later position if the matter does crystallise. And it may give the insurer ammunition at renewal to argue that the firm’s own assessment of recurrence risk was inadequate.
Notification language should be factual, neutral and complete. The circumstance is described; the policy clause being engaged is identified; the firm’s preliminary view is reserved. Defensive rhetoric does not improve the position and frequently weakens it.
On any PI programme above a single primary layer, each excess insurer has its own contract with the insured. Each requires notification in its own right. Notifying only the primary insurer — on the assumption that the claim “will never reach the excess layers” — is a mistake that can extinguish the excess cover entirely if the claim later climbs the tower.
Specialist brokers placing layered programmes will normally produce a single notification letter copied to all insurers on the slip, but the duty to ensure each insurer is properly notified rests with the policyholder. The protective discipline is to confirm receipt from each layer in writing.
Once a circumstance has been notified during a policy year, it must be fairly presented at the next renewal. Most policies will then exclude that “known matter” from the new insurer’s cover — the matter remains the responsibility of the year in which it was first notified. The error firms make is the reverse: failing to disclose the notified matter at renewal, on the assumption that the prior insurer is “dealing with it”.
Under the Insurance Act 2015 duty of fair presentation, the firm must disclose every material circumstance the insured knows or ought to know, or sufficient information to put a prudent insurer on enquiry. A failure to disclose a notified circumstance is almost certainly a breach. The proportionate remedies in Schedule 1 then apply: avoidance for deliberate or reckless breach; proportionate reduction or amended terms for other breaches.
Toward the end of each policy year, some firms send a broad “protective notification” sweeping in any matter that might conceivably produce a claim. The instinct — to lock in the current policy year for any latent issues — is sensible. The limits are real.
A protective notification must still meet the test of a “circumstance” as defined in the policy. Vague, undifferentiated lists of work types or client categories will not engage cover for matters that did not, in fact, meet the test at the date of notification. The HLB Kidsons line of authority is clear: a circumstance requires identifiable awareness. A blanket letter that simply says “we may have done some things wrong” is unlikely to lock in cover for a claim that surfaces three years later. Specialist brokers will normally help draft the protective notification with sufficient specificity to engage the policy without being so broad as to be ineffective.
The Insurance Act 2015 introduced proportionate remedies for breaches of the duty of fair presentation and for breaches of warranty. Section 11, in particular, provides that an insurer cannot rely on non-compliance with a term to exclude, limit or discharge its liability if the insured can show that the non-compliance could not have increased the risk of the loss which actually occurred.
In notification disputes, that provision has real value where, for example, notification was made through the wrong channel but actually reached the insurer in time. It does not assist where notification was simply too late, or where the matter was never notified at all. The structural rule — claims made and notified during the policy period — survives the Act intact.
A claim is an actual assertion of legal liability — a letter before action, a court claim form, a regulatory complaint demanding compensation. A circumstance is something that may give rise to such a claim — a complaint, a discovered error, an adverse event. Notification of a circumstance engages the policy year in which the notification is made for any subsequent claim arising from it, even if the claim itself emerges in a later year. The distinction matters because the policy treats each differently, and the wording will normally specify what must be included in a circumstance notification.
The wording controls. Most policies require notification “as soon as practicable”, “as soon as reasonably possible” or within a specified number of days from the relevant trigger. Where the trigger is awareness of a circumstance, the clock starts from the date the firm became aware in an objective sense — not from the date a partner decided to act. The HLB Kidsons line of authority confirms that the test is objective, and prudent firms diary the deadline from the date of awareness.
The first-stamp or deeming rule is the convention that notification of a circumstance during a policy year deems any subsequent claim arising from that circumstance to fall within that policy year, regardless of when the claim is actually made. The effect is that the policy year in which the circumstance was notified bears the claim, and later policy years exclude it as a “known matter”. The rule preserves continuity of cover but only if the notification itself is valid and timely.
It can, but it should be cautious. An internal investigation conducted before notification may produce documents that are not protected by litigation privilege and that are later disclosable in proceedings. It may also breach the policy’s notification deadline. The safer course is to notify first, then investigate under the umbrella of the policy and, where appropriate, under instruction from insurer-appointed solicitors. Brokers will normally advise on the sequencing.
Notifying the wrong insurer — typically the new insurer for a circumstance that arose before renewal — usually means the matter falls between policy years. The new insurer declines because the matter pre-existed inception; the old insurer declines because notification was not made during its period. The Insurance Act 2015 may offer relief in narrow cases where the wrong-channel notification actually reached the correct insurer in time, but firms should not rely on that. A pre-renewal notification audit, run by the broker, is the protective discipline.
Not in the way many firms hope. Section 11 of the Act protects against insurer reliance on a breach where the breach could not have increased the risk of the loss. That can help in narrow procedural disputes — for example, where notification was made via the wrong channel but reached the insurer in time. It does not assist where the notification was simply made too late or never made at all. The structural claims-made-and-notified trigger is unaffected by the Act.
The wording defines a notifiable circumstance, and the firm must apply that definition. Most policies require something more than routine client dissatisfaction — a specific matter that may give rise to a claim. Over-notification is not without cost: it inflates the notified-matters schedule at renewal, may attract premium loading, and can complicate the firm’s claims narrative. Under-notification, however, is more dangerous. A specialist broker will normally help calibrate the threshold, and prudent firms err toward notification where the test is met.
A protective notification is a notification sent at or near the end of a policy year to lock in cover for matters that have surfaced but not yet crystallised into formal claims. It is useful where the firm is changing insurer and wants to preserve cover under the outgoing policy; where a complaint has been received but not yet formalised; or where an internal review has identified a potential issue. The limits matter: the notification must still meet the policy’s definition of a circumstance, and a vague catch-all letter will not engage cover for matters that did not meet the test at the date of notification.
Apex Insurance Brokers Ltd is an independent UK insurance broker based in Bristol, advising professional services firms on professional indemnity insurance and related covers. The firm is authorised and regulated by the Financial Conduct Authority (firm reference 724952) and registered at Companies House (company number 07014570).
This commentary reflects market conditions as at May 2026 and is provided for general information. Insurance market conditions, policy wordings and regulatory positions change frequently; firms should obtain advice specific to their circumstances rather than rely on general commentary.
Apex Insurance Brokers serves UK professional services firms and commercial businesses. Call 0117 325 0027, email hello@apexinsurancebrokers.co.uk, or request a quotation.
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