Category: Clauses & wordings · Reviewed by Matt Bartlett, Director · Founder · Last reviewed June 2026
A “Circumstance” is a set of facts that may give rise to a claim but has not yet matured into one — notifying a Circumstance in the current policy year secures cover under that policy even if the claim itself arrives years later.
The definition of “Circumstance” is the most strategically important provision in any claims-made liability policy after the Claim definition itself. It enables the Insured to lock in cover under the current policy for matters that have not yet developed into formal Claims, by giving notice during the policy period.
A typical UK PI wording defines Circumstance as: “any fact, matter, event or occurrence of which the Insured first becomes aware during the Period of Insurance that may reasonably be expected to give rise to a Claim against the Insured under this Policy”. The clause is then linked to the notification provision, which usually reads: “If the Insured gives notice in writing during the Period of Insurance of a Circumstance, any Claim subsequently made arising from that Circumstance shall be deemed to have been first made during the Period of Insurance in which the notice was given”.
The economic significance is enormous. Claims-made policies pay only when a Claim is made during the policy period (or within the discovery period). If a claim emerges after renewal, the new insurer responds — but the new policy may have lower limits, narrower cover or an exclusion for the very matter that has now developed. By notifying a Circumstance, the Insured fixes cover under the older policy on the older terms.
The two leading questions in interpretation are (a) what level of awareness is required, and (b) what “may reasonably be expected” means. The Court of Appeal addressed both in HLB Kidsons v Lloyd’s [2008] EWCA Civ 1206 (the leading UK authority): the test is objective — would a reasonable insured in the position of the Insured have expected that a claim might arise? It is not whether a claim is likely or probable.
A separate but related concept is “blanket” or “kitchen-sink” notification — a generalised notice citing systemic issues or product defects rather than a specific matter. UK courts have allowed these in narrow circumstances but require sufficient particularity. Kajima UK Engineering v Underwriter Insurance Co Ltd [2008] EWHC 83 (TCC) held that a vague blanket notification was ineffective.
The legal framework is principally contractual: the policy means what it says, construed in accordance with Arnold v Britton [2015] UKSC 36 and Wood v Capita Insurance Services [2017] UKSC 24. There is no statutory definition of Circumstance.
The Insurance Act 2015 reformed the law on warranties and conditions but did not alter the substance of Circumstance clauses. Section 11 of the Act prevents an insurer relying on a breach of a term that does not relate to the actual loss, but a notification clause typically does relate to the matter notified and so the section 11 defence has limited effect.
The leading authorities are:
Solicitors’ and RICS minimum terms expressly require insurers to accept Circumstance notification. The SRA Minimum Terms and Conditions, clause 3, provides that any notice of Circumstance shall be deemed to be notice of a Claim — a deliberate enlargement to protect solicitors and their clients.
In the practical life of a broker file, three patterns recur.
The “I think we got it wrong” call. A fee earner identifies a potential error — a missed limitation date, an under-valuation, an incorrect tax return, a structural calculation error — and reports it internally. The risk manager calls the broker. The first question is always: do we notify now, or wait? The answer is almost always: notify now. There is no premium consequence to notifying a Circumstance that never matures into a Claim, but there is a major consequence to not notifying a Circumstance that does. Insurers reserve the right to take notifications into account at renewal, but in practice non-material notifications rarely move the needle.
The blanket notification at end-of-policy. When a firm is changing insurer, retiring an insurer at run-off, or anticipating a major scandal (post-PPI, post-Defective Premises, post-fire-safety), there is strong incentive to file a generalised notification capturing as broad a category as possible. UK courts allow this but require particularity. Kidsons identified the minimum elements: the subject-matter (what work or product or transaction is potentially defective), the period (when), and the reason for concern (what specifically might give rise to claims).
The retrospective Circumstance dispute. When a Claim emerges three years after the relevant work, the question is whether the Insured knew of the facts in time to have notified. Insurers often argue that earlier emails or internal reports show awareness. The Insured argues that those documents did not amount to a reasonable expectation of a Claim. The dispute can determine which policy year (and which limit) responds.
Practical drafting tips:
Brokers should maintain a register of Circumstance notifications and review it at every renewal so that no issue is unintentionally re-presented as a “new” matter.
Mandatory Circumstance notification (SRA MTC, RICS, ICAEW). Regulated profession minimum terms require insurers to accept Circumstance notification and to deem any such notice to be notice of a Claim.
Discretionary Circumstance notification. The default in commercial PI: the Insured may notify, and if it does, cover is locked in. There is no obligation to notify if the Insured genuinely does not consider a Claim is likely.
Conditional notification. Some policies require both notice of the Circumstance and a subsequent confirmation when the Claim materialises. Failure to follow up can void the linkage.
Blanket notification clauses. Allow notification of a categorical matter (a product type, a class of advice, a particular transaction series) rather than an individual case. Insurers limit these tightly.
End-of-policy notification window. A short period after policy expiry (typically 14 to 60 days) during which the Insured may notify Circumstances of which it became aware in the final days of the policy.
“Should reasonably have known” notification. A wider trigger that requires the Insured to have either actually known or constructively known of the matter. More common in US-style D&O than UK PI.
No-fault notification. The notification is not treated as an admission of liability and cannot be used against the Insured in claim valuation or as evidence of breach.
Apex Accountants LLP, a 50-partner chartered accountancy firm, holds a PI policy with limit £20m. The policy year runs 1 April to 31 March.
In February 2026 the firm’s tax department identifies that a particular type of capital allowance claim made on behalf of approximately 40 clients between 2019 and 2024 may be incorrect because of a 2025 First-Tier Tribunal decision reinterpreting the relevant legislation. The total potential HMRC clawback across the affected clients is estimated at £8m, with potential negligence claims of £3m to £5m against the firm.
On 15 March 2026 the firm files a blanket Circumstance notification with the insurer, identifying: (a) the specific allowance claim methodology used, (b) the period during which it was used, (c) the names of the 40 clients (in a confidential annexe), and (d) the FTT decision that prompted concern.
In June 2027 (after renewal — new limit £10m) the first client sues for £450,000. By June 2028, 12 of the 40 clients have made claims totalling £2.8m.
Because the Circumstance was notified on 15 March 2026, all subsequent Claims arising from the identified facts are deemed first made on that date and fall under the 2025/26 policy with the £20m limit. The lower 2026/27 limit is irrelevant.
The lesson: when a systemic issue is identified, file the Circumstance notification immediately, with proper particularity, and capture all potentially affected matters in the notice.
By Matt Bartlett, Director, on 2026-06-11. Next review: 2026-12-11.
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This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-11. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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