The first step to take is to identify if a 'claim' has
been made as defined by the policy. This is an important element of
'claims made and notified policies' and is required to
trigger the insuring clause or clauses of the policy.
Definitions of claim vary between insurers. A usual definition
in a professional indemnity policy can be along the lines of:
Receipt by you of any written notice or demand for compensation
made by a third party against you or any writ, statement of claim,
summons, notice or any other originating legal or arbitral process,
cross claim, counter claim or any third party or similar notice,
containing a demand for compensation by a third party against
Definition of a claim in a directors' and officers'
In the context of a directors' and officers' policy, a
usual definition can be along the lines of:
Receipt of any Director or Officer of any written notice or demand
for compensation made by a third party against any Director of
Officer or any writ, statement of claim, summons, notice or any
other originating legal or arbitral process, cross claim, counter
claim or any third party or similar notice, containing a demand for
compensation by a third party against any Director or Officer
including any criminal proceedings.
As an insured, it is important to review the definition of
'claim' in policies of insurance held by you to ensure that
it will capture the types of claims that might arise in the context
of your business. If you are unsure, seek advice from an insurance
broker specialising in professional liability covers.
Notification of circumstances can protect you in future
Section 40(3) of the
Insurance Contracts Act 1984 (Cth) allows for insureds to
notify facts that might give rise to a claim. In simple terms, the
section allows for a future claim that arises out of the facts
notified to be linked to the earlier notification, even if the
claim is made after expiration of the insurance policy.
It is imperative that insureds notify circumstances to their
insurer immediately and at least during the period of insurance.
This will avoid disputes about late notification and/or operation
of policy exclusions for prior knowledge.
Definition of a circumstance in professional liability
Examples of circumstances that might be notified in the context
of professional liability policies are:
An employer is in the process of disciplinary action or
performance management of an employee for serious employment
A complaint about poor service or advice is made by a customer
A customer refuses to pay a bill or invoice on the basis that
the service or advice provided was stated to be substandard or
A notice is received from ASIC seeking information or delivery
of books or records of a company
An accountant fails to lodge a BAS on time with the potential
for a penalty being issued against the client
Notify claims and circumstances immediately
If you are uncertain about whether a claim has been made or a
circumstance has arisen, seek immediate and early advice from an
insurance broker specialising in professional liability covers. If
in doubt, notify.
The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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