A recent decision by an English court throws light on what
circumstances may require notification under a claims-made
As its name implies, cover is triggered under a
'claims-made policy' when the insured receives a notice
during the policy period of a claim that he or she is liable.
The notice can be oral or in writing. (In Australia, the
Insurance Contracts Act 1984 (Cth) governs
notifications, especially in sections 40 and 54.)
In the UK, the insured must notify the underwriter that the
insured has received the notice during the same policy period,
or within the days of grace given after it ends.
Claims-made policies are also triggered by notifying the
underwriter of a circumstance the insured becomes aware of that
may lead to the insured receiving a claim of liability. Once a
circumstance is notified to the underwriter, it
'anchors' cover during that policy period.
Subsequently, if the insured receives notice of a claim in
relation to the circumstance, the cover that existed during
that policy period potentially responds, even after the policy
period has ended.
What amounts to a circumstance requiring notification to the
underwriter is a critical issue for insureds. On the one hand,
underwriters do not want to be bombarded with fanciful
possibilities. On the other, a failure to notify a qualifying
circumstance can be fatal to the insured's cover. Most
policies exclude from cover a circumstance that existed in a
prior policy period (although some have extensions that cover
this, if the insured is continuously covered with the same
underwriter over that period).
The recent English decision of HLB Kidsons v Lloyd's
Underwriters  EWHC 1951 (Comm) provides some useful
guidance in this area. The Court was required to examine very
closely what amounted to a circumstance requiring notification
under a claims-made policy. The Court made the following
A circumstance which may give rise to liability is one
which, 'objectively evaluated, creates a reasonable and
appreciable possibility that it will give rise to a loss or
claim against the assured'.
A document that is not intended by the insured to
constitute notice to an underwriter of a circumstance, but
which meets the objective criteria, takes effect as a valid
notice if it is, in fact, communicated to the
A policy requiring a notice to be in writing must be,
'sufficiently clear and unambiguous that it leaves the
recipient in no reasonable doubt that the assured is by the
communication purporting to give notice of a
The notice must not be premature. If at the time the
insured purports to give notice, 'he is not aware of a
relevant circumstance, then the notice is
The liability must be causally related to the
A notice requiring notice 'to the Underwriters'
meant each underwriter directly, subject to any prior
agreement to give notice to just the lead or an agent.
This is a welcome clarification of the legal requirements in
this critical area. All brokers placing cover under claims-made
policies, and all underwriters issuing such policies should
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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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