Kajima UK Engineering Ltd v The Underwriter Insurance Company Ltd

A notification under a claims-made professional indemnity policy covers the specific circumstances objectively identified in the notice. It may include defects causing, symptoms of, or consequences flowing from those circumstances. It does not create general cover for unrelated defects later discovered during an investigation. The insured’s awareness of the notified circumstances is relevant, and any later claim must have a causal, rather than merely coincidental, connection with them. An investigation referred to in a notification is not itself a free-standing notified circumstance. Further notifications are required when the insured becomes aware of new circumstances that might reasonably be expected to produce a claim.

Kajima was the main contractor for a development constructed using stacked accommodation pods and flat-pack timber elements. During the policy period, it notified its professional indemnity insurer that the pods were settling and moving excessively, causing distortion to adjoining roofing, balconies and walkways, with possible risks to services and internal areas.

After the policy expired, investigations revealed numerous further defects, including structural deficiencies and defects in floors, walls, fire safety and building services. Kajima settled the employer’s claims and sought guidance on the extent to which those losses fell within the 2001 notification. The court was asked to determine the governing principles, rather than finally classify each defect.

1. The notification was limited to the circumstances stated in it. Objectively construed in its factual context, the notice concerned excessive settlement and movement of the accommodation pods, the resulting or potential distortion of adjoining roofing, balconies and walkways, and associated risks to services, internal areas and tenants. It was not a general notification of defects in the development.
2. A notification may cover the causes, symptoms and consequences of the notified circumstances. It may therefore extend to later damage or loss which causally flows from the notified settlement, movement or distortion. The insured need not identify the precise cause at the date of notification, provided the relevant circumstance was within its actual awareness.
3. The notification did not cover defects discovered later merely because they were found during investigations connected with the building or because there was a historical continuum of investigation. Later-discovered defects were covered only so far as they materially caused, contributed to, related to, or resulted from the notified circumstances. Coincidental discovery was insufficient.
4. The reference to an investigation then under way referred to an investigation into the pod settlement and movement. It was not a separate, stand-alone notified circumstance and could not enlarge the notification to include unrelated defects. Further notification was required when the insured became aware of new circumstances which might reasonably be expected to produce a claim.
5. The court endorsed the principles stated in HLB Kidsons v Lloyds Underwriters and others [2007] EWHC 1951 (Comm) as correct and applicable. The court declined to treat the parties’ later conduct as materially assisting the objective construction of the 2001 notice. Consequential relief, declarations and further directions were reserved.