Euro Pools v RSA: Applying Kajima Restrictively

Over the years, issues of attachment and which policy responds has been a great source of contention in professional and financial lines, with issues around notification frequently being the source of such disputes. Liability policies are particularly susceptible to notification disputes due to the claims made nature of such policies, providing cover for claims which are made against the insured in the policy year, even though the alleged negligence may have occurred in earlier years.

Whether a current or previous policy responds to the claim can centre on whether the claim arose out of circumstances previously notified. However, where a problem develops over time, ascertaining whether an earlier notification actually gave rise to the ultimate claim can be difficult to assess. This was one of the issues to be decided in the recent case of Euro Pools Plc (In Administration) v Royal & Sun Alliance Insurance Plc [2018] EWHC 46 (Comm) (we touch on the other issues to be decided below).

The insured claimant was a company which specialised in the installation and fitting of swimming pools, providing movable floors in order to vary the water depths for different pool activities and "booms', being walls that separated the pool into different zones. An air drive system raised and lowered the booms.

In February 2007, the insured notified its insurers of a problem with the movable floors which needed to be urgently remedied and it also stated that there was a problem with some of its booms; a problem had been identified with the stainless steel tanks which, when filled with air, raised the booms. However, the insured believed at that stage that the problem was fixable with the use of bags and, in any event, the costs involved were below the excess on the professional indemnity policy. The insured replaced the tanks in some of the pools with inflatable bags but these later failed and it notified its insurer in May 2008 that the boom system would have to be changed to a different system. The insured claimed, amongst other things, for the mitigation costs of replacing the system.

The February 2007 notification was made to the 2006/07 policy (the First Policy) and the May 2008 notification was made to the 2007/08 policy (the Second Policy). Both policies were written by the same insurer on the same terms and required the insured to notify the insurer "as soon as possible after becoming aware of circumstances...which might reasonably be expected to produce a Claim...Any Claim arising from such circumstances shall be deemed to have been made in the Period of Insurance in which such notice has been given."

There were several issues to be decided at trial but in relation to the booms claim the Court had to decide whether there was a valid notification in...