Court Of Appeal Reins In 'Kidsons' On Circumstantial Notifications

The decision last year in H L B Kidsons-v-Lloyd's

Underwriters and Others, made unhappy reading for

policyholders and imposed a very strict approach to complying with

notification provisions in 'claims made' PI policies. This

week, however, the Court of Appeal has swung the law back in favour

of insureds, as Nik Carle now reports.

A reminder of the facts in Kidsons

Kidsons ran a specialist business that marketed tax avoidance

schemes to clients. In 2001, a Kidsons employee signalled some

worries about the merits and implementation of these tax schemes

and in response, in August of that year, Kidsons wrote to their

broker saying: "...the Inland Revenue, if minded, could be

critical of some procedures followed in certain

cases...".

There were then two follow-up communications to Underwriters.

The first, at the beginning of October 2001, enclosed a claims

bordereau report and then, at the end of March 2002, Kidsons'

next letter warned: "...in some instances there might be

procedural difficulties involving...each scheme and this might lead

to the possibility of criticism in the future."

The notification provision at the heart of this case was General

Condition 4 ("GC4"), which is largely standard

? of course - in these sorts of PI wordings:

"...The Assured shall give to the Underwriters notice

in writing as soon as practicable of any circumstance of which they

shall become aware during the [policy period]...which may

give rise to a claim or loss against them. Such notice having been

given any loss or claim to which that circumstance has given rise

which is subsequently made after the expiration of the [policy

period] shall be deemed for the purpose of this Insurance to

have been made during the subsistence thereof."

In the High Court, Mrs Justice Gloster had held that strict

compliance with GC4 was required if notifications were to be

effective, notwithstanding that this provision was not explicitly

described as a condition precedent.

Further, the August and October communications could not amount

to valid notifications ? the Judge said ?

because they were "insufficiently clear and unambiguous to

constitute notice of a circumstance giving rise to a claim under

GC4", as "...far too vague and

nebulous..." and further, they did not include an

identification of any error, act or omission or possibility of any

claim nor did they identify any specific products or procedures in

question.

Finally, whilst the March 2002 letter was a proper notification

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