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PI cover in the UK is written on a claims-made basis. The policy responding is the one on risk when the claim is first made against the insured, or when a circumstance is first notified to insurers. Confusing the two can move a matter from a policy year the insured is happy with to one they are not.
That single feature is what makes professional indemnity behave so differently from a motor or property policy. An occurrence-based policy responds to the year in which the event happened, whoever is on risk when the claim eventually surfaces. A claims-made PI policy does the opposite: it fixes cover to the year in which the claim is made or the circumstance is notified, not the year in which the underlying work was done. A negligent piece of advice given in 2021 can be met by the 2026 policy if that is when the demand arrives, provided nothing earlier fixed it to an earlier year. Every renewal therefore matters, because each renewal draws a fresh line around what the incoming insurer will and will not accept.
A claim is a formal demand from a third party. In PI wordings it usually means a written communication asserting a right to compensation or a remedy, or the issue of proceedings. The claim exists in the outside world: the client, the counterparty or their solicitor has said, in terms, that the professional is answerable for something. The trigger is the insured's receipt of the demand.
The defining feature of a claim is that it comes from outside. The insured does not decide when a claim has been made; the third party does, by asserting a right. That assertion can be blunt or oblique. A solicitor's letter before action is plainly a claim. So, in most wordings, is an email that says the client expects to be compensated, or an application to a court or tribunal naming the professional. What matters is that a right or remedy has been asserted against the insured, not the format it arrives in. Because the claim is defined by the third party's conduct, the insured's only real control is over how quickly and how well they report it once it lands.
A circumstance is different. It is a set of facts of which the insured has become aware, and which may give rise to a claim. There is no demand yet. Policy wordings typically require notification of any circumstance the insured becomes aware of, or that a reasonable professional would recognise as likely to lead to a claim. The trigger is awareness of the facts, not any communication from a third party.
A circumstance is therefore something the insured is expected to spot for themselves. It is the earliest point at which the professional realises, or ought to realise, that a piece of work may have gone wrong in a way that could cost someone money. A missed limitation date discovered during a file review, a set of accounts filed on the wrong basis, a boundary drawn incorrectly on a plan, a piece of tax advice that a later change of practice has cast into doubt: none of these is a claim, because nobody has yet demanded anything. Each is a circumstance, and the clock on notifying it starts the moment the insured has the knowledge, whether or not the client has noticed.
Every well-drafted PI wording contains a deeming clause. If a circumstance is validly notified during the policy year, any claim later arising out of it is deemed to have been made during that same year, regardless of when the formal claim lands. The current policy responds; the later policy does not.
If the insured lets the year run out without notifying a circumstance they were aware of, and the formal claim arrives in the following year, the claim may be caught by the known circumstances exclusion of the new policy - see known circumstances exclusion - and refused by the old policy because no claim was made in that year. The professional can find themselves uninsured for something they knew about at the time.
The deeming clause is, in effect, the mechanism that lets a professional lock a problem into the policy they hold today. Notify a circumstance while the year is open and the insurer has, in return for the premium already paid, accepted the risk of whatever grows out of those facts. That protection travels with the notified circumstance even if the insured changes insurer at the next renewal, and even if the claim does not materialise for years. It is the single most valuable feature of a claims-made policy and, equally, the one most often lost through inaction. A circumstance that is recognised but not reported before expiry falls into a gap: the old insurer says no claim was made in its year, and the new insurer says the facts were known before its year began.
The courts have looked closely at what a notification must contain. In Kajima UK Engineering v Underwriter Insurance [2008] EWHC 83 (TCC), Akenhead J held that a notification must identify the facts sufficiently for insurers to understand what may be coming. A generic sweep-up notice - a bare statement that the insured foresees possible claims from a range of projects - is unlikely to bite. The notification must tie the future claim to the facts before insurers at the time.
In HLB Kidsons v Lloyd's Underwriters [2008] EWCA Civ 1206, the Court of Appeal considered a notification made about a tax planning product. It examined whether the notice conveyed enough about the underlying facts to fix later claims to the policy year. Rix LJ's judgment is the reference point on the standard of specificity a valid notification must meet.
The point was tested again in McManus Seddon Runhams v European Risk Insurance Company [2013] EWHC 18 (Ch), where a firm of solicitors argued that a broad notification covered a range of files. The court declined to read it so widely. Blanket notifications are not a substitute for identifying the specific matters concerned.
Read together, these cases point to a practical standard. A notification that names the client or project, describes the act or omission said to be at fault, and identifies the potential loss or the person likely to complain is far more likely to hold than one that gestures vaguely at a category of work. The temptation, particularly near renewal, is to lodge a broad protective notice covering everything that might conceivably go wrong. The authorities suggest that approach buys little: a notice that does not tie a future claim to identifiable facts before insurers may not deem that claim back at all. Specificity is what makes a notification effective, not breadth.
Because a claims-made policy responds by year, the limit that matters is the limit in force when the claim is made or the circumstance is notified, not the limit that was in force when the work was done. A firm that has grown, taken on larger instructions, or moved into higher-value work should review whether the limit carried today is adequate for claims that may still emerge from older, smaller engagements. Where a professional body sets a compulsory minimum, that minimum is a floor rather than a considered figure; the right limit is driven by the size of the largest instruction, the value at risk on a single file, aggregation of related matters, and defence costs, which in many wordings erode the limit rather than sitting outside it. The interaction with notification is direct: a circumstance notified today draws on today's limit, so a firm that has under-bought will find the shortfall exposed at exactly the moment a notified matter turns into a paid claim.
Example (illustrative only, not advice on any actual policy). An accountancy firm receives an email from a client complaining about a personal tax return. The client is angry. They have not demanded money, instructed solicitors or identified a loss figure. Strictly this is not yet a claim - but it is plainly a circumstance the firm is aware of.
Under the duty of fair presentation in section 3 of the Insurance Act 2015, and under the notification condition of the policy, the firm should notify the circumstance during the current policy year. See circumstance notification explained. The notification should describe the client, the return, the period covered, the nature of the complaint and the potential exposure.
If the firm does not notify, and a formal letter of claim arrives four months later in a new policy year, the deeming clause of the earlier policy cannot help. The new policy may refuse to respond on known circumstances grounds.
Take a surveyor who, during an internal audit, finds that a valuation on a commercial property looks high against later evidence. No lender has complained and no borrower has defaulted. On its face there is nothing to report to anybody. But the facts are known to the firm, and a reasonable surveyor would recognise that if the property is sold at a shortfall, a claim could follow. That is a circumstance. Notifying it now, with the address, the date of the valuation, the figure reached and the reason for the doubt, fixes any future claim to the current year. Waiting until a lender writes in converts a manageable notification into a live claim under whatever policy happens to be in force then - which may carry a higher excess, a lower limit, or an exclusion that did not apply before.
Not necessarily. A complaint that does not assert a right to compensation or a remedy is usually a circumstance rather than a claim. It still needs to be considered for notification, because the facts are known to the insured, but it does not by itself trigger the claim definition. The safer course is to treat a substantive complaint as a notifiable circumstance and let insurers decide how to record it.
Yes, and doing so is generally the prudent course. The test in most wordings is whether the insured is aware of facts that may give rise to a claim, not whether a claim is certain. Notifying facts that never mature into a claim costs nothing; failing to notify facts that do can leave the matter uninsured under both the old and the new policy.
A circumstance validly notified to the outgoing insurer before expiry stays with that insurer under the deeming clause, even after you move. The incoming insurer will usually exclude anything you knew about before its year began. This is why notifying live circumstances before renewal - and disclosing them fairly to the new insurer - matters so much.
Only up to a point. As Kajima, HLB Kidsons and McManus Seddon Runhams show, a notification that does not identify the underlying facts with enough specificity may not deem a later claim back to the policy year at all. Breadth is not a substitute for detail; a focused notice tied to identifiable facts is far more likely to bite.
The policy wording decides, read against the facts. The claim definition turns on what the third party has done; the circumstance definition turns on what the insured knows. Where a matter sits close to the line, the decision is best taken with your broker and, where the wording is finely balanced, discussed with insurers rather than guessed at.
Apex Insurance Brokers acts for firms in solicitors' PI, accountants' PI, architects' PI and surveyors' PI. The judgement call between claim and circumstance is one Apex will talk through on the facts - what the wording says, what the deeming clause requires, and the level of detail needed to meet the Kajima and Kidsons standard.
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.
