We are often asked by our Insured clients as to when they need to notify a claim under the terms of their professional indemnity policy. The answer is not a straight forward one and will often depend on the terms of your policy and your insurer's approach to notification of a circumstance which may give rise to a claim.
Generally speaking if a situation arises which falls within the definition of a 'Claim' within your policy terms, this should be notified to your insurer in early course, failure to do so may affect the availability of cover if an indemnity is sought at a later date.
However, the situation may not be as clear where the matter could potentially become a claim but has not yet. If your policy requires you to notify a circumstance that may give rise to a claim, then strictly speaking this should be notified to your insurer if the complaint/situation has the potential to develop into a claim. If you have organised your professional indemnity insurance via a broker, they will often provide you with guidance as to whether or not you should consider notifying a 'circumstance' to your insurer.
We are often told that there has been a delay in notifying matters to Insurers because the Insured client thought that they could deal with the matter themselves or didn't want to increase their claims record, amongst other reasons. The decision to notify Insurers of a potential claim is of course a business decision for you and the financial risk to your business as a result of a grumble or complaint may be perceived to be fairly modest and therefore you may not wish to make a claim under your professional indemnity policy. However as a word of caution, if you fail to notify a matter in accordance with your policy terms and then the matter escalates such that you require Insurer's assistance, you run the risk of any indemnity afforded to you being reduced or declined altogether, where your insurers have suffered prejudice as a result of any actions taken by you in the interim.
Whatever you chose to do, your broker and/or insurer will often be able to provide you with guidance on how to approach any uncertainty.
