On a claims-made-and-notified policy, notifying late is one of the few errors that can defeat an otherwise valid claim entirely. The damage comes from two directions. First, if a claim or circumstance is not notified within the policy year in which the insured became aware of it, the claim may fall between two policies - too late for the year it should have been notified, and excluded from the next year as a matter known before that year began. Second, many wordings make notification a condition precedent to the insurer's liability, so that breach releases the insurer from any obligation to pay that claim.
Where notification is drafted as a condition precedent, the courts have held that compliance is a prerequisite to recovery. In George Hunt Cranes v Scottish Boiler and General Insurance [2001] EWCA Civ 1964 the insured lost cover for failing to comply with a notification condition precedent, even though the insurer suffered no obvious prejudice. Prejudice is generally irrelevant to a condition precedent: the point is that the condition was not met. This is a harsher regime than applies to ordinary policy terms, which is why the drafting of the notification clause repays careful reading.
The Insurance Act 2015 reformed several aspects of insurance law, but it did not abolish notification conditions. Section 11, which addresses terms not relevant to the actual loss, can assist an insured where a term is designed to reduce a particular type of risk and non-compliance did not increase the risk that occurred. However, the courts and commentators treat many notification requirements as going to the scope of cover itself on a claims-made policy, rather than as risk-mitigation terms, so section 11 may offer limited protection against a genuine claims-made timing failure. An insured should never assume the Act will rescue a late notification.
The firms most at risk are those where problems surface slowly. Accountants may not learn of a tax or audit error until a client is assessed or a third party complains; solicitors may not appreciate a limitation or conveyancing error for months. Both sit on claims-made cover where the notification clock starts on awareness, not on the eventual claim. Our guides to accountants' PI insurance and solicitors' PI insurance explain the sector-specific timing traps.
The practical protection is a disciplined internal process: capture awareness of any potential problem, decide promptly whether to notify, and notify to the insurer in the manner the policy requires before the year ends or the policy is replaced. Where a firm is changing insurer, sweeping up known circumstances before expiry is essential. Apex reviews notification obligations at placement and at renewal and can act quickly when a firm needs to notify before a deadline passes.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.