One Size Fits All?

The decision in Friends Provident Life and Pensions Limited v Sirius International Insurance Corporation and Others (2 July 2004, unreported) focuses on a number of important preliminary issues concerning the construction and effect of notification clauses contained in primary and excess layer "claims made" policies. Although the claims under the policy arose from pension mis-selling losses, the policy wordings under examination by the court are common in professional indemnity policies across the market.

BACKGROUND

The claimant ("FPLP"), was the successor in title to London & Manchester Assurance Co Ltd ("LMA") whose business included giving financial advice on personal pensions. LMA had professional indemnity insurance cover for the period 1 February 1993 to 31 January 1994, which took the form of a primary layer covering losses up to £1 million, and an excess layer of £4 million in excess of £1 million. Both layers were placed by brokers Bowrings, and were written on a "claims made" basis, providing an indemnity for losses arising from claims made against LMA during the policy period.

Clause 2 of the primary layer policy ("Clause 2"), underwritten by a Lloyd's Syndicate, required LMA, as a condition precedent to liability, to give to "the Underwriters notice as soon as possible during the period of this policy... of any circumstance of which [LMA] shall become aware which may give rise to a claim against them or any of them". The clause also provided that, once notice had been given, LMA was obliged to give underwriters full details in writing, and that if this was done, "any claim or loss to which the circumstance has given rise which is subsequently made after the expiration of the [policy] shall be deemed to have been made during the subsistence hereof ".

The excess layer was written partly by a group of Lloyd's Syndicates (this policy was referred to as the "co-insurance policy"), and included, by clause 5 ("Clause 5"), a provision that "any claim[s]... or loss(es)... or any circumstances... which are likely to give rise to such a claim or loss, shall, if it appears likely that such claim(s) or loss(es) may exceed the indemnity available under the Policy/ies of the primary and Underlying excess layers, be notified immediately by [LMA] in writing to the Underwriters hereon". The remainder of the excess layer was written by the defendants, members of the London companies' market. The defendants' policies purported to incorporate...