In the recent case of Cultural Foundation (t/a American School of Dubai) & another v Beazley Furlonge Ltd & others, the court considered issues surrounding the notification of insurance claims, where a prospective claim had the potential to fall within two separate notification periods.
The case concerned professional indemnity insurance policies that provided insurance to a firm of architects, insolvent at the time of the proceedings. The defendants in the matter were the architects’ insurers. The claimants brought claims against the architects in relation to contracts entered into for services relating to the construction of a school campus in Dubai, plus the Abu Dhabi National Exhibition Centre.
The claimants had each obtained arbitration awards against the insured architects and, following their insolvency, were statutory assignees of the insured’s rights under the architect’s professional indemnity insurance policies by virtue of the Third Parties (Rights against Insurers) Act 1930. No claim having been received by the architects during the relevant policy period, any cover arose by virtue of the provision in the policies enabling a ‘notification of circumstances’ during the policy period giving rise to a claim. An interesting facet of these proceedings was that there were two insurance policies in place in respect of which such notification was given, and the question therefore arose as to which policy was liable to pay out.
Most professional indemnity insurance policies will require the insured party to notify the insurer of:
Professional indemnity insurance policies usually also contain a ‘deeming provision’, which means that if the insured makes a valid notification as per point 1 above, then a future claim arising out of those notified circumstances will be deemed to have been made during the policy period in which the notification was made, as opposed to when the subsequent actual claim was made.
Such a notification will only be valid if a reasonable person would conclude that the notified circumstances (however wide or narrow) were likely to give rise to a claim, and where any subsequent claim was sufficiently and causally related to the circumstances notified to the insurer.
The court held that if a prospective claim falls within two separate notifications, a claimant would, in principle, be entitled to choose under which policy to advance the claim. Moreover if the policy does not exclude previously ‘notified circumstances’, this will mean that the claimant is able to determine the policy period to which each claim is attached.
It is therefore important for insured parties to be aware of the notification requirements in their policies, as the extent to which claims will be covered by any notification will depend not only on the particular facts but also on the terms of the policy and notification. Insurers must be notified when circumstances arise. The helpful take-away from this decision is that the insured may have a choice as to which policy to advance its claim under – which could prove to be very useful if one policy would be more beneficial than the other.