www.arca.org.uk
A GUIDE TO NOTIFICATION AND
CONDITION PRECEDENT LANGUAGE
A recent legal case has
The issue turned on whether the notification clause in the policy was a condition
again raised the question
precedent to cover (breach of which means that Insurers do not pay) or an ordinary
condition where Insurers only remedy would be to counter claim for damages,
of when a company should
provided they could prove they had been prejudiced. The notification clause in the
notify their insurance
policy did not contain the words “condition precedent” but the Court’s approach was
broker of a potential claim.
to review the policy as a whole and the commercial purpose behind the clause was a
very influential factor in the decision to find in favour of Insurers which entitled them to
Rather than set out the
decline liability.
specific facts of the case,
In this article Matt Farman Director of Howden Professional Risks outlines the
which are long and
importance of notifying a claim or a potential claim promptly and mitigating the
possibility of Insurers declining liability.
complex, we merely need
Firstly, all Insureds should be reminded that it is better to be safe than sorry and
to note that this case
must notify any potential claim promptly in accordance with the strict conditions of
involved the key issue of
their policy. If you do not understand a particular condition then you must
communicate this to your broker and ask them to explain it fully.
whether the failure to
It is paramount that an Insured is aware of the implications that late notification of a
notify a potential claim in potential claim can have, and that all members of staff are educated and aware of the
time meant that insurers
notification process under the policy. All staff should be able to identify a claim or a
did not have to pay the
circumstance which is likely to give rise to a claim and communicate this to a director
of the business immediately. As an ATaC member your internal procedures manual
claim when it arose. should be robust, however, we recommend that an understanding of the notification
process is included within this.
How to indentify a claim
A claim will usually include:
• Written or verbal notice of a breach of contract or negligent act where the
accuser is seeking compensation, remedial action etc. from the firm, whether
or not the specific details of that breach or negligent act are given;
• A Letter of Claim, as set out in the Pre-Action Protocol section of the Civil
Procedure Rules (usually but not always from a solicitor);
• The service of a Claim Form, Writ, Arbitration Notice or any other formal
document commencing legal proceedings of any kind;
How to identify a circumstance
A circumstance is essentially a factual situation which a reasonable bystander would
consider was more likely than not to result in a claim being made, irrespective of
the merits of such a claim. It will usually include:
• Any intimation by any third party, whether expressed or implied, of an
intention to make a claim against the firm even though details are vague or
considered to be spurious;
• Any criticism or dispute, whether expressed or implied, relating to your
performance, or that of any party for whom you are responsible;
• An awareness by you that any services provided or actions taken by you, or
As the recommended insurance broker
by any party for whom you are responsible, may have failed to meet the
for ATaC members, Howden will be
standard required or have led, or are likely to lead, to a third party loss.
speaking at the forthcoming ATaC
seminars and will be delighted to If you are in any doubt as to what may constitute a circumstance you should speak
answer any questions regarding this
to your broker.
topic. Should any further information be
The current economic climate is likely to give rise to more notifications, and this
required, please contact the Howden
means that it is essential to make sure you have your house in order and are aware of
LABsure team on 020 7648 7210
your requirement to comply strictly with your policy terms and conditions.
arca & atac news 21
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