Professional Liability Guide

PROFESSIONAL LIABILITY GUIDE

In summary, regarding an insured’s failure to notify (within the current policy period):

ƒ a claim is cured by section 54, subject to any prejudice; ƒ a circumstance that may give rise to a claim:

• is cured by section 54 if there is a deeming provision in the insurance policy, subject to any prejudice; and • is not cured by section 54 in the absence of a deeming provision in the insurance policy. In practical terms, most deeming provisions have been removed from insurance policies owing to Australian Hospital Care. The result is as follows. While an insured who fails to notify of a claim received during a policy period may still have a prima facie entitlement to cover under that policy, an insured who fails to notify of a circumstance that might give rise to a claim received during a policy period will not enjoy that protection. It is in that situation that an insured (who changed insurers) would potentially find themselves without insurance cover. The earlier insurer would be entitled to decline cover due to the absence of a notification, and the later insurer could rely on the policy exclusion for a prior known circumstance that might give rise to a claim. ƒ the high occurrence of coverage problems arising from the failure to notify of pre-existing circumstances promptly; ƒ the fact that in the absence of a deeming provision in the prior policy, neither the current nor prior insurer may be obliged to respond to a claim; and ƒ the uncertainty and resultant cost in determining whether something constitutes a notifiable circumstance highlight the importance for insureds of good internal risk management and insurance reporting/ notification protocols and the value of continuity of cover. These issues can be avoided if insureds notify promptly. Alone and in combination,

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