Making Sense Of Kidsons: - The Problem With Notification

Insurance disputes which turn solely on the question of

notification do not come along very often. This is one reason why

the litigation between chartered accountants, HLB Kidsons, and

their professional indemnity insurers, has attracted so much

attention. In court, Kidsons was required to argue the toss with

its professional indemnity insurers as to whether it had

effectively notified insurers of circumstances concerning flawed

tax avoidance schemes marketed to its clients. All the claims which

were ultimately brought against Kidsons were received after the

expiry of the policy, and the policy was on a claims-made basis, so

the issue was purely, in the words of the Judge, " a contest

about notification".

The end result, as we now know, is that the Court at first

instance held that a notification had been made to insurers, albeit

not to the whole market, and only of limited circumstances; the

Court of Appeal allowed that a wider range of circumstances had

been notified, but otherwise left the Judgment at first instance

broadly intact. However, Kidsons was a case decided on a particular

policy wording and on its particular facts. Are there any general

points of principle that can be take away from the decision?

Condition precedent

One point which has caused some debate is that the assured's

obligation to notify circumstances to insurers "as soon as

practicable" was construed by the Court as a condition

precedent to insurers' liability. This was despite the fact

that the requirement was not expressed to be a condition precedent.

On the face of it, this seems inconsistent with themodern approach

which requires conditions precedent to be expressed in clear

language, given the draconian effect which non compliance can have

for the policyholder. Moreover, the clause containing this

provision directly followed a condition which was expressed

to be a condition precedent. It would therefore be reasonable to

assume that the words "condition precedent" had been

deliberately omitted by the draftsman for a reason.

The clause in question said "The Assured shall

give to the Underwriters notice in writing as soon as practicable

of any circumstances of which they shall become aware during the

period specified in the Schedule which may give rise to a loss or

claim 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 period specified in the Schedule

shall be deemed for the purpose of this Insurance...