Chapter 2 Fifty Shades


of Law WHAT CONSTITUTES A CIRCUMSTANCE (OCCURRENCE) THAT MAY GIVE RISE TO A CLAIM and


WHEN SHOULD YOU REPORT IT TO INSURERS


What are the elements that identify a circumstance that may give rise to a claim and are notifiable to insurers? Well there are several and below is a summary of these and some tips on what you should report and when to insurers.


Two key elements for a notifiable circumstance


1 An insured must be subjectively aware of the circumstance, as illustrated in the important English Court of Appeal decision of Kidsons v Lloyds’ Underwriters (2008) (“Kidsons”).


2 The circumstance must objectively be material in that it is likely to, or may, give rise to a claim (subject to the wording).


72 | The Report • June 2018 • Issue 84


Awareness can be tricky to identify:


> If a junior employee of a company receives a letter of complaint from a client but tells no-one about it generally their knowledge is unlikely to be attributed to the insured company for the purposes of an insurance Policy subject to the Policy wording.


> In contrast knowledge by a board of directors and perhaps knowledge of one director alone may be sufficient.


> Any in between situation is tricky and a question of awareness is fact sensitive.


Awareness can arise from internal or external factors:


> External example: a letter of complaint from a third party.


> Internal example: Thorman v New Hampshire (1987), a case concerning an insured who was an architect:


‘A typical example would be a belated realisation, based upon a study of professional journals, that perhaps he had specified inadequate foundations for a building which he had designed and which had already been erected’.


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