West Midlands Firms Advised 'Tell All'

Accountants, lawyers

and other professional advisers in the West Midlands could be storing up

trouble for the future by failing to notify their insurers of changes in their circumstances,

according to Birmingham law firm Browne Jacobson. The recent case of HLB

Kidsons v Lloyds Underwriters has served as a salutary lesson to insured firms

that the consequences of anything less than full disclosure could be

far-reaching.

The case

involved a firm of accountants that marketed a number of tax minimisation

products under a separate company name. Under the terms of its professional

indemnity insurance, the firm was covered beyond the expiry of its policy

against claims arising from incidents that had occurred within the term.

However, in order to ensure it was fully covered, the firm was required to

notify its insurers as soon as practicable of any situations that might

foreseeably lead to a claim being made against it.

Derek Bambury, a

partner who specialises in professional indemnity insurance at Browne Jacobson,

said: ìWhen it became apparent that a number of problems existed with the

products it offered, Kidsons - unfortunately for them as things turned out -

notified their insurers in vague terms. When Kidsons sought, after the currency

of the policy, to claim indemnity against a number of claims, their insurers

contested that the notification had been insufficient to fall within the terms

of the policy.î

In judgement,

Mrs Justice Gloster, DBE, held that whilst Kidsons might be deemed to have

provided sufficient notification of two specific instances, they failed to meet

the relevant criteria on the notification of a wider range of products.

The judgement is

one that is ultimately being perceived as a 'win' for the insurance community,

not so much for the specifics of the case, but more for the insight it provides

on the importance of full disclosure.

Not only does

the judgement give an indication of the way that judicial opinion is flowing,

it also forms the basis of a checklist that insurers and their customers can

rely on to verify whether or not notifications have been communicated in a

manner that falls within the requirements.

Browne

Jacobson has developed a notifications checklist that both parties can use to

ensure they do not fall foul of the terms of use.

What requirements must be satisfied for a notice to be valid and effective for the purposes of the relevant condition in the policy?

As a matter of fact, of what circumstance or...