How is a Circumstance Defined?
The Dictionary often defines a circumstance as “A fact or condition connected with or relevant to an event or action or an event or fact that causes or helps to cause something to happen, typically something undesirable”.
However, despite insurers choosing not to put a definition of a circumstance into their policies, we are brought up in the Insurance Industry to believe that it means A ‘circumstance’ is a fact, situation or circumstance that the Insured knows about and which the Insured ought to reasonably realise may give rise to a claim in the future.
I don’t know about you but to me this is very subjective.
It would be very easy for you to say, well just report anything that has a sniff of being a circumstance. This is not always practical for three main reasons.
Definition of a circumstance in professional liability policies
There is a general refusal by insurers to make this clearer in their policy wordings. It is almost like they want this to be a potential “get out of gaol free” card. Instead we are left with examples of circumstances that might be notified in the context of professional liability policies. So let us differentiate between different circumstances that may be open to interpretation of what is a circumstance such as:
The common theme to make it clear it is a circumstance is that there are facts that could you to believe there could be a claim and that the claimant would have suffered a financial loss.
There are two decisions that impact greatly,
Both have an impact on what is a circumstance and what becomes a claim.
Notification of circumstances can protect you in future claims
(3) Where the insured gave notice in writingto the insurer of facts that might give rise to a claim against the insured as soon as was reasonably practicable after the insured became aware of those facts but before the insurance cover provided by the contract expired, the insurer is not relieved of liability under the contract in respect of the claim, when made, by reason only that it was made after the expiration of the period of the insurance cover provided by the contract.
This basically states that Insureds notify a matter to Insurers that might give rise to a claim prior to the policy expiring, this section will allow for a future claim that subsequently arises out of the facts notified to be linked to the earlier notification, even if the “claim” is made after expiration of the insurance policy.
So at the end of the day, the definition of a claim is just a procedural issue on the form you are able to move it from just a circumstance up to a claim. It is essentially still an issue of what actually is a circumstance that should be reported.
The safest thing we advise you should do as an Insured is to notify circumstances to their insurer immediately and at least during the period of insurance. This will avoid disputes about late notification and/or operation of policy exclusions for prior knowledge.
Notify claims and circumstances immediately
If you are uncertain about whether a claim has been made or a circumstance has arisen, seek immediate and early advice from an insurance broker specialising in professional liability covers. The best Insurance Broker to discuss this with is the team at Cooper Professional Risks Pty Ltd