Professional indemnity policies draw a careful line between two ideas that lay readers often conflate: a claim and a circumstance. The distinction determines which policy year responds, which aggregate limit applies, which excess bites, and how the client answers the proposal-form question at renewal. Getting it wrong can strand a matter between policy years or void cover for non-disclosure.
A claim, in most PI wordings, is a formal written demand for compensation, service of proceedings, or an equivalent assertion of legal liability against the insured. It is something the third party does. A circumstance is a fact, matter, act, omission or event that the insured knows about (or ought reasonably to know about) which may give rise to a claim. Notification of a circumstance is a communication from the insured to the insurer, before any demand has been made, that something has happened which could turn into a claim.
PI policies are written on a claims-made-and-notified basis. Cover is triggered in the year the claim or circumstance is first notified, not the year the work was done. That is how a notification locks a matter into a specific policy year.
The leading authority is HLB Kidsons v Lloyd's Underwriters [2008] EWCA Civ 1206, with its first-instance judgment Kidsons v Lloyd's Underwriters (No 2) [2007] EWHC 1951 (Comm). The Court of Appeal confirmed that a valid notification during a policy year fixes cover for any later claim arising from those circumstances under that year's policy, even if the formal demand materialises years later when a different insurer is on risk. Powerful protection — but a poorly drafted notification will not lock anything in.
Kajima UK Engineering Ltd v The Underwriter Insurance Co Ltd [2008] EWHC 83 (TCC) is the cautionary counterpoint. The insured attempted a broad, catch-all notification covering essentially all its ongoing projects. The court held that a notification must identify specific circumstances — the project, the alleged defect, the potential quantum, the likely claimant — with enough particularity for the insurer to investigate. A generic "we might have problems on various jobs" letter did not fix cover. Each notifiable matter needs its own file, its own particulars, and its own written notification within the policy year.
The Insurance Act 2015 imposes a duty of fair presentation on commercial insureds at inception and every renewal. Every known circumstance — whether or not formally notified — must be disclosed. A notification made in the current year should be listed on the renewal proposal with the insurer's reference and the date. Failure to disclose a known circumstance at renewal risks avoidance for non-disclosure, quite separately from any dispute about which year responds.
Because notifications are frequently litigated years after the fact, contemporaneous documentation matters. A dated email trail, a letter with proof of postage, an insurer acknowledgement — these establish what was notified and when. A notification made by phone and never reduced to writing is a hostage to memory.
Worked example. An architect completes the design of a residential block in 2019. In September 2024 the client flags concerns about the cladding specification. The architect's PI year runs 1 July to 30 June. In September 2024 the practice notifies its 2024–2025 insurer of the specific circumstance: named building, alleged defect, potential quantum, likely complainant. In April 2026 — deep into the 2025–2026 year — the freeholder issues a formal letter of claim.
Cover locks under the 2024–2025 policy, because the circumstance was validly notified in that year. The aggregate limit, retention and conditions of the 2024–2025 wording apply, not those of the 2025–2026 policy. Had the architect not notified in September 2024, the 2025–2026 insurer would in principle be on risk when the formal demand arrived — but the architect ought to have disclosed the known circumstance on the 2025 renewal proposal. If they did not, the 2025–2026 insurer might avoid the policy for non-disclosure, leaving the practice uninsured for the very matter cover was meant to protect.
A professional practice benefits from a systematic approach: a separate register for notified circumstances distinct from formal claims; a quarterly review of matter files and complaints logs; a house rule that any adverse letter or peer-review flag is tested against the policy definition of circumstance; and a renewal process that reconciles the register with the proposal declaration.
Notifications appear on the claims-experience record underwriters see at renewal. A notification that does not develop into a claim has less pricing impact than a paid claim, but is not invisible. The broker's role is to present it in context — what was notified, why it was prudent to notify, and how the matter has since closed or developed.
See our companion entry on notification of circumstance — what and when. Profession-specific context sits in our pillars on solicitors' PI insurance, architects' PI insurance, surveyors' PI insurance, and IFAs' PI insurance.
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.