Professional indemnity policies contemplate two kinds of notification: notification of a claim that has actually been made against the insured, and notification of a circumstance that may give rise to a claim in future. They are governed by different parts of the wording and they do different work. Notifying a claim brings that claim into the current policy for handling and indemnity. Notifying a circumstance secures cover for a claim that has not yet materialised, tying any later claim back to the policy in force when the circumstance was notified.
The mechanism that links a notified circumstance to a later claim is the deeming provision. Where the insured validly notifies a circumstance during the policy period, any claim subsequently arising from that circumstance is deemed to have been made during that period - even if the claim itself lands years later, after the policy has expired and perhaps after the insured has moved to a different insurer. This is why a circumstance notification is valuable: it fixes the point in time at which cover attaches. A more detailed treatment sits in our reference entry on the deeming provision.
On a claims-made-and-notified policy, timing is everything. If a professional becomes aware of a problem in one policy year but says nothing, and a claim is then brought in a later year, the later insurer may decline it as arising from a circumstance known before their policy began - and the earlier insurer may decline it because nothing was notified in time. The circumstance notification is the tool that closes that gap. Surveyors facing a possible valuation dispute, and advisers who identify an unsuitable recommendation, both rely on it. See our guides to surveyors' PI insurance and IFA PI insurance for the sector context.
To engage the deeming provision the notification must be valid under the wording. In J Rothschild Assurance v Collyear [1998] the court accepted that a properly framed notification of circumstances could be effective even where the future claims were not yet identified with precision. The key is that the notification is made in accordance with the policy - to the right party, within any time limit and with enough detail to identify the matter notified. A notification that is too vague may fail to capture the later claim.
When a professional is unsure whether they are looking at a claim or a circumstance, the safer course is usually to treat it as a circumstance and notify it, rather than wait for the position to crystallise. That said, framing matters: a circumstance notification should describe the matter accurately and should not, for a commercial insured, understate or overstate the potential exposure. Apex helps firms decide which notification route applies and drafts the notification so it engages the deeming provision cleanly.
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.