Professional Liability Guide

CHAPTER 6 – CLAIM, CIRCUMSTANCE AND NOTIFICATION

CHAPTER 6 – CLAIM, CIRCUMSTANCE AND NOTIFICATION

Professional indemnity insurance is commonly written on either a ‘ claims made ’ or ‘ claims made and notified ’ basis.

In essence, a ‘ claims made ’ trigger means the policy that responds is the one in force at the time the claim is made against the insured. Typically, it does not matter when the relevant breach occurred, subject to the operation of any retroactive date (which may be a specific date or unlimited). A ‘ claims made and notified ’ policy, as the name suggests, requires both that a claim is first made against an insured and notified to an insurer during the period of insurance. Accordingly, an insuring clause will not prima facie respond to a claim if it is not also notified within the policy period. What is a claim? In CE Heath Casualty and General Insurance v Pyramid Building Society, 388 Ormiston J said of the word ‘ claim ’ that ‘ possibly no word in insurance law has given rise to more difficulties’ . To deal with those difficulties and to provide clarity for themselves and for insureds, liability insurers will often define (sometimes exclusively) the term ‘ claim ’ within the policy wording. Notwithstanding those attempts at clarity, difficulties and uncertainties still arise.

In the context of a claims made and notified policy, the focus is on the claim by a third party on an insured, not the insured’s claim on an insurer.

‘ Claim ’ is now typically defined in most policies to encompass the receipt by the insured of a written demand for compensation or a writ, statement of claim, or other originating process.

A statement of claim or writ will be non-contentious – although it is the receipt by the insured of the demand or process that is the relevant consideration regarding when a claim is ‘ made ’ against it. A statement of claim that is filed but not served will not be a claim 389 (nor without more would it be sufficient to trigger a prior claim exclusion). What amounts to a demand for compensation can be more difficult. A person saying they are investigating a loss and requesting information may not be sufficient, although it need not necessarily claim a sum of money either. Ultimately, it will be a question of fact. Courts can be reluctant to give significant weight to judicial authority on the interpretation of the word ‘ claim ’, even where prior decisions are relevant from a legal or factual perspective. The preferred approach appears to be for courts to determine each case on its own facts having foremost regard to the particular clauses within the policy in question.

Nonetheless, the numerous precedents for what constitutes a ‘ claim ’ are of some practical assistance.

In Walton v National Employers’ Mutual General Insurance Association Ltd, Bowen JA referred to the primary sense of the ‘ claim ’ in a liability policy as ‘a demand for something as due, an assertion of a right to something. It imports the assertion, demand or challenge of something as a right. ’ 390

388 [1997] 2 VR 256. 389 King v McKean & Park (A Firm) [2002] VSC 350. 390 [1973] 2 NSWLR 73, 82.

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© Carter Newell 2023