Notifying Your Insurer: Getting It Right

If something goes wrong in your business, don't forget to think about possible insurance cover. Could you have an insurance claim? If so, you need to notify your insurer - and quickly.

Introduction

When something goes wrong, the first reaction within a business is often to try to fix the problem, be it by seeking to placate an aggrieved customer, repairing damage that has been done or assessing the company's position as a possible defendant in legal proceedings.

All of these are important steps - but it is just as important to dust off any relevant insurance policies and check the notification provisions. Might you have an insurance claim? If so, you will almost certainly have to notify your insurer - and quickly. If you delay, you may find that the insurer is not obliged to cover any loss that arises.

What does the notification clause say?

There will be a notification provision somewhere in the insurance policy. Read this carefully. It may require notice of a possible claim to be given within a certain number of days – or, more often, "immediately" or "as soon as possible". Neither have a hard and fast meaning (it will all depend on the relevant circumstances), but on any view the message has to be – act fast.

Most policies require notice to be given of "any occurrence" or "any circumstance" which "may" or "is likely to" give rise to a claim or loss. The precise wording will vary and will inevitably give rise to debate as to whether what has happened is enough to trigger the notice provision.

Some guidance on the point was given by the Court of Appeal in HLB Kidsons v Lloyd's Underwriters [2008] EWCA Civ 1206. Rix LJ noted that:

"Any ambiguity rests in the ambiguity of identifying the relevant "circumstances"...the two questions will be: (i) Have such circumstances come to the attention of the insured... so that he can be said to be aware of them? (ii) Are such circumstances such that they "may give rise to a loss or claim against them"? The latter question is an objective one; the insured may have his own views about the complaint, but the question has to be looked at objectively."

Toulson LJ made a similar point:

"...the right general approach to a policy clause which entitles an insured to give notification of a circumstance which may give rise to a claim, and thereby cause the risk to attach to that policy, is to treat the right itself as subject to an implicit requirement that the circumstance may reasonably be regarded in itself as a...