Notification of Insurance Claims: Beware!

While the terms of an insurance contract will vary depending on the type of policy, there are a number of standard or common terms.

The distinction between terms of insurance policies that are “conditions precedent” to insurer’s liability as opposed to bare conditions is often a crucial one. Conditions precedent must be fully complied with on a very strict basis: if such term is breached, the insurer can refuse to cover a claim even if it has not suffered any material harm or prejudice by it.

A claims notification condition is one of such conditions precedent.

Requirements for notification

Determining when you should notify a circumstance, what that notification should comprise, and whether a subsequent claim can be affected by that notification depends on a number of things.

A typical notification clause will include provision along the following lines:

  • There must be a circumstance;
  • Of which the insured is aware;
  • That is “likely to” or “may” give rise to a claim;
  • That the insured has notified in accordance with the requirements of the policy.

Unless the policy provides otherwise, there is no particular form in which a circumstance has to be notified to your broker or insurer. Where, however, the policy expressly provides that a notification must be in a particular form, it should be followed by the insured. For example, if a policy requires written notification, then oral notice will not suffice.

What is a circumstance?

The majority of policies do not seek to define a “circumstance”.

In general terms, it is a fact or situation which creates a reasonable and appreciable possibility that it will give rise to a loss or claim against you. A typical “circumstance” would be a complaint by a client, a workplace injury by an employee, a slip and trip incident by a visitor on your premises – or a threat to potentially bring a claim which has not yet evolved into an actual claim. Another example of a circumstance would be a realisation by you that your advice or services had been negligently provided and that a claim may arise as a result.

There are two keys parts for a fact or situation to become a notifiable circumstance:

  • You must be aware of the circumstance: once you are aware, time starts to tick for notification purposes under of the policy.
  • The circumstance must be material in that it is likely to, or may, give rise to a claim (subject to the wording): this question can be considered by the Courts with hindsight, but can generally be interpreted as “probable”, “more likely than not” or having at least 50% likelihood of a claim occurring.

Timing of the notification

Your policy will contain an obligation to notify a circumstance (or claim) to your broker or insurer, regardless of fault, within a certain time period and must be strictly complied with, so as to not prejudice the insurer’s position in investigating the incident, interviewing all the parties, collecting or preserving the essential evidence and containing the claim costs.

Again, the timing obligations will depend on the particular policy wording, but examples may include “immediately”, “as soon as possible” or within a strict time period, such as 7 days. It is clear from the previous decisions of the Courts that what is at stake is whether the insured has acted reasonably given all the surrounding circumstances of the loss, but in any case, delay which is within the control of the insured or which is excessive in the circumstances, will render the claim time-barred under the policy.

In addition, under the new Central Bank (National Claims Information Database) Act 2018, a claimant who suffers personal injuries must serve a letter of claim in writing, outlining the nature of the alleged wrong, on the wrongdoer within one month of the cause of action, i.e. the date on which the injury occurred or the knowledge of same. If a claimant fails to do so, the Court is now obliged to take appropriate actions if justice requires so, including penalising the claimant on costs.

These changes, together with the applicable policy wording, should help businesses and their insurance advisers to investigate the incidents and assess claims earlier.

Every policy will have a specific claims reporting condition so it is essential that you read your policy carefully and observe its terms. If you require any assistance, please call us on 049-4332944, e-mail info@martininsurance.ie or complete our online enquiry form.

Disclaimer: The material contained is this article is for general information purposes only and does not constitute professional advice.

About the Author: James Martin has 16 years of experience as a general insurance broker. He is a member of the Chartered Insurance Institute and has completed a Diploma in Corporate Finance.