Notifying a circumstance: the call a broker makes before a claim exists

Contents

1. Why the notification date is the cover date
2. What actually counts as a circumstance
3. A same-day process when it arrives as a message
4. Turning it into a renewal conversation
5. Frequently asked questions

A director of an architects' practice you look after sends a message on a Thursday afternoon: "One of our clients is unhappy about the drainage on the Bramley job — probably nothing, they're just letting off steam." Nobody has claimed anything. There is no letter, no solicitor, no figure. On any professional indemnity or directors' and officers' policy in your book, that message is the moment the clock starts.

Claims-made cover is the only widely sold structure where the date of the notification, not the date of the mistake, determines which policy responds. That single feature produces most of the uninsured losses a commercial broker will ever see, and most of them were avoidable in the week the client first mentioned it. This is a process problem far more than a legal one.

Why the notification date is the cover date

On a claims-made wording, the policy responds to claims first made against the insured during the period of insurance — plus claims made later that arise from circumstances first notified during that period. The Solicitors Regulation Authority's minimum terms and conditions, which set the floor for every regulated law firm's PI cover, are drafted exactly that way, and most professions' wordings follow the same architecture.

The practical consequence is a gap that opens quietly. Suppose your client learns in October that a piece of work has gone wrong, says nothing, and renews on 1 January with a different insurer. The claim lands in March. The old insurer is off risk because nothing was notified before expiry. The new insurer declines because the client knew about the problem before inception — and, on a commercial risk, failing to tell them may also breach the duty of fair presentation under the Insurance Act 2015, which we cover separately in our note on fair presentation of risk. The client is uninsured for a loss that both policies were bought to cover, and the conversation about why nobody warned them lands on your desk.

That is the difference from an occurrence policy such as employers' liability, where the year of the event governs. It is worth saying out loud to clients, because most of them have never had it explained.

What actually counts as a circumstance

Wordings usually require notification of any circumstance that "may" or "might reasonably be expected to" give rise to a claim. That threshold is low, and clients consistently set it too high because they are reading it as an admission of fault.

English law has been generous to the insured here. In Euro Pools plc (in administration) v Royal & Sun Alliance Insurance plc [2019] EWCA Civ 808, the Court of Appeal confirmed that the insured must be aware of circumstances that might reasonably be expected to produce a claim, but does not need to know the cause of the problem or the consequences that may flow from it. A so-called "hornet's nest" notification — we have a problem, we do not yet know how deep it goes — can be valid, and a later claim will attach to it provided there is a causal, not merely coincidental, link to what was notified. The lesson for a broker is that vagueness is not a reason to wait. It is a reason to notify carefully and describe the uncertainty.

Three things get confused in practice, and it helps to name them for the client:

What arrived	What it is	What the broker does
Client says a customer is unhappy or a job has gone wrong	Potential circumstance	Gather the facts, advise on notification, notify within the current period if the threshold is met
A demand for money or a letter of claim	Claim	Notify immediately; do not let the client respond substantively first
Client is unhappy with your service	A complaint against the brokerage	Your own DISP process, and a look at your own PI cover

The last row is a separate animal: it runs through your own DISP complaints process, and the same claims-made logic then applies to your firm's own PI policy at your next renewal.

A same-day process when it arrives as a message

Circumstances rarely arrive as a formal email. They arrive as an aside on a phone call or, increasingly, as a WhatsApp message to the account handler, half-apologetic and easy to miss. Build for that.

1. Recognise and escalate the same day. Any message containing dissatisfaction, an error, a threat, a regulator, or a request for a copy of an appointment letter goes to whoever owns claims — not into a "deal with it Monday" pile.
2. Acknowledge without assessing liability. Confirm receipt, say you are reviewing whether it needs to be notified, and ask the client not to admit liability, offer remedies or discuss the matter with the other side until you have spoken. Getting this wrong can itself prejudice cover.
3. Pull the wording and the dates. Which policy period, which insurer, retroactive date, notification clause, any deeming provision that treats a notified circumstance as a claim made in that period.
4. Collect the minimum viable facts — who, what, when, the work involved, the potential quantum if it is knowable, and what the client has already said to the other side.
5. Advise in writing whether to notify, with your reasons. If the client decides not to, record that decision and their reasons in writing too. This is the file note that protects everyone.
6. Notify and confirm. Send it, get written acknowledgement from the insurer, and put the acknowledgement in front of the client. Then diarise it into the renewal declaration so it is disclosed to the incoming market.

Two operational details make the difference. First, expiry dates: if a circumstance surfaces in the final fortnight of a policy period, notification before expiry is worth a great deal, so those files jump the queue. Second, the record. If the first mention of the problem was a message, that message is now evidence of when the client knew and when you were told. It needs to sit in the brokerage's records rather than on a handler's phone — the same discipline we set out for archiving WhatsApp under SYSC 9 and ICOBS. A shared inbox where every thread is attributable to a named handler, timestamped and exportable, turns a soft "I think he mentioned it in March" into a dated record.

Once a matter is notified, the client is in the slowest, most anxious process a professional firm ever goes through. The cadence of updates matters more than the content of most of them; our claims advocacy note and the claim notification workflow cover how to keep that rhythm without the file going quiet for six weeks.

Turning it into a renewal conversation

Notification is easier to sell as a service than as a warning. Three moves work well with professional-services clients:

• Explain claims-made once a year, in writing, at renewal — one paragraph, with the October example above. It converts a technical clause into a story the finance director remembers.
• Ask the notification question at every renewal and every mid-term contact: "Is there anything at all that might turn into a claim — however unlikely?" Record the answer even when it is no.
• Explain what notification does not mean. A notified circumstance is not an admission and does not automatically become a claim. Clients who understand that report earlier, which is the whole objective.

None of this is exotic broking. It is a triage habit and a record you can retrieve. Firms that build both find the awkward Thursday-afternoon message becomes a routine file rather than the start of a coverage dispute.

Frequently asked questions

Should we notify everything, just in case?

No — blanket notification of every grumble can inflate an insurer's view of the risk and affect renewal terms, and some wordings resist notifications with no substance behind them. The judgement is whether a reasonable person in the client's position would see something that might give rise to a claim. Where it is genuinely borderline, notify and say so plainly; where you advise against, put the reasoning in writing.

Can we notify on the client's behalf?

Often yes, and many clients expect it, but it depends on your terms of business and on the wording. Whoever sends it, the notification must come from an authorised person and be accurate. Confirm in writing to the client exactly what was notified and when, so there is no doubt later about who did what.

What happens if a notification is made late?

It depends on the wording and on whether the insurer was prejudiced. Insurers can and do reduce or decline cover where late notification made a difference — for example where defence costs would have been lower had they been involved sooner. A pattern of late notifications also affects renewal terms, which is a commercial cost on top of the coverage risk.

Does the client have to know how much the claim will be worth?

No. Following Euro Pools v RSA, awareness of circumstances that might reasonably be expected to give rise to a claim is enough; the insured does not need to know the cause of the problem or how far the consequences run. Notifying an evolving situation and describing the uncertainty honestly is better than waiting for clarity that arrives after the policy has expired.

Where does the brokerage's own PI cover fit in?

In exactly the same place. Your firm's PI is claims-made too, so a client complaining about your advice is a circumstance for your own policy. Treat your own notifications with the discipline you ask of clients, and review the position each year alongside your PI renewal declarations.