Notification of insurance claims - how much detail is required?
The Court of Appeal of England and Wales, in Euro Pools Plc v Royal & Sun Alliance Insurance Plc  EWCA Civ 808, has recently considered the question of how much information must be provided to validly notify an insurance claim.
Euro Pools installed swimming pools across the United Kingdom. Euro Pools had professional indemnity insurance with Royal & Sun Alliance (RSA) for the year 30 June 2006 to 29 June 2007 (the First Policy), and again for the year 30 June 2007 to 29 June 2008 (the Second Policy).
The policies were in much the same terms, with a limit of indemnity £5 million, and were written on a claims made basis. Under Condition 2, Euro Pools was entitled and required to notify RSA "as soon as possible after becoming aware of circumstances… which might reasonably be expected to produce a Claim", and if it did so then the claim against Euro Pools was deemed to be made in the policy year of notification.
The policies covered mitigation costs, so that Euro Pools was given an indemnity "against costs and expenses necessarily incurred in respect of any action taken to mitigate a loss or potential loss that otherwise would be the subject of a claim under this Insurance."
Problems developed with two aspects of some swimming pools: the adjustable horizontal platforms that allowed the water depth to be varied, and booms which allowed vertical walls to be raised and lowered so as to divide the pools into swimming areas.
The booms initially incorporated stainless steel tanks into which air was pumped and removed to raise or lower the boom. By February 2007 a problem had arisen with them and in February 2007 RSA was notified that they were not working properly. At that stage, the proposed fix was to replace the tanks with inflatable bags, and Euro Pools advised RSA that they did not expect the problem to exceed the self-insured amount.
In June 2007, while arranging the renewal of the First Policy, RSA was told that the tanks on the booms were defective and would be fixed with inflatable bags of air, but that Euro Pools wanted the matter "logged on a precautionary basis should there be any future problems." Problems persisted and in March 2008 Euro Pools informed its brokers that the bags did not work and that the system would be replaced with one of hydraulics. Remedial work was then carried out.
The Court of Appeal's decision
The question was whether the mitigation costs fell within the period for the First Policy or the Second Policy; it mattered because the cover in the First Policy period had been exhausted.
The Court of Appeal held that the mitigation costs fell under the First Policy. The notifications in 2007, while concerned only with the steel tanks, were nevertheless applicable to all of the problems that developed later.
The Court of Appeal ruled that if a problem was notified as a circumstance, the notification caught all subsequent claims connected with that circumstance even though the cause of the problem, the extent of the problem and the solution to the problem was not known at the time of notification:
"an insured must be aware of a circumstance in order to notify the insurer of that circumstance; but there is no requirement that he be aware of the full causal origins and implications of the circumstance notified."
The case thus gives express recognition to the validity of a "can of worms" or "hornet's nest" notification.
The Court of Appeal also held that if there was a valid notification in the first year, there could not be a valid notification in subsequent years, so that it was not possible to argue that there had been a second notification in the second policy period.
If you have any questions about this decision or would like to discuss it further, please contact a member of our insurance team.
Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.