Summary
Under a claims-made professional indemnity policy, a notified circumstance must be identified objectively by reference to the insured’s actual knowledge and the notification’s factual context. It must suggest, to a reasonable person with that knowledge, at least a 50% likelihood of a claim. A later claim must have a causal, rather than merely coincidental, relationship with the notified circumstance.
A broad notification may cover a recognised category of related deficiencies, even where every detail is not yet known, but it cannot retrospectively cover a distinct breach which had not yet occurred. An insurer may recover defence costs paid beyond its proportionate contractual share and set them off against indemnity payments. Rights relating to defence costs do not pass to substantive third-party claimants under the Third Parties (Rights against Insurers) Act 1930. Post-award interest falls outside the professional indemnity clause where it arises from later delay in satisfying the award.
Factual background
The claimants sought indemnities from primary and excess professional indemnity insurers after RMJM, their former architect and professional consultant, became insolvent. The claims arose from arbitration awards concerning defects and delays in the design and administration of construction projects in Dubai.
The court determined ten preliminary issues. They concerned the policy year to which the claimants’ claims attached, the scope and timeliness of notifications, agreement and estoppel, the primary insurer’s entitlement to recover or set off overpaid defence costs, the transfer of defence-cost rights under the Third Parties (Rights against Insurers) Act 1930, and entitlement to post-award and statutory interest.
Held
- Notifications. The insured must have actual knowledge of the circumstances notified. The circumstances must objectively suggest to a reasonable person in the insured’s position that a claim was more likely than not. The notification is construed objectively in its factual context, and the later claim must be causally linked to it.
- Notification 923 covered the category of coordination deficiencies, including the acoustic-design deficiency and lack of detail and cross-referencing in drawings. It did not cover the distinct Sector A columns defect. By March 2009 RMJM did not know facts making a claim about the columns more likely than not, and the notification did not identify that fundamental structural problem. Notification 953 did cover the Sector A columns defect.
- A notification may describe a broad category of known deficiencies, but cannot cover a later breach which had not yet occurred. Whether delay in carrying out remedial works arose from the notified columns defect or from a new breach remained for the final trial.
- There was no agreement or estoppel that the whole ASD claim fell within the 2008/09 policy. RMJM did not breach the 2009/10 notification condition, and the insurer would not have been estopped from relying on such a breach had one been established.
- The primary insurer’s defence-cost liability was proportionate to the part of the claim within its limit. An implied term, alternatively restitution, entitled it to recover any excess paid. The claim for overpaid defence costs was sufficiently closely connected with the indemnity claims to support equitable set-off, including against statutory transferees.
- Defence-cost rights were first-party rights and did not transfer to ASD or ADNEC under the 1930 Act. Nor could the primary insurer recover the overpaid costs from excess insurers under that Act.
- Post-award interest was not compensation or damages arising from RMJM’s professional business. It arose from a supervening delay in satisfying the award and was outside the policy indemnity. Statutory interest was available, save in respect of costs where RMJM had no corresponding liability to pay interest.
The court’s approach to earlier authorities
Available to signed-in members.
Appellate history
First-instance determination of ten preliminary issues in proceedings brought by the claimants against primary and excess insurers.
Key cases cited
22 authorities cited.
- Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Limited and another [2015] UKSC 72
- Zurich Insurance PLC UK Branch v International Energy Group Limited [2015] UKSC 33
- Nesbit Law Group LLP v Acasta European Insurance Company Ltd [2018] EWCA Civ 268
- Zurich Insurance Plc v Maccaferri Ltd [2016] EWCA Civ 1302
- Astrazeneca Insurance Company Ltd v XL Insurance (Bermuda) Ltd & Anor [2013] EWCA Civ 1660
- Geldof Metaalconstructie NV v Simon Carves Ltd [2010] EWCA Civ 667
- Laker Vent Engineering Ltd v Templeton Insurance Ltd [2009] EWCA Civ 62
- HLB Kidsons (A Firm) v Lloyd's Underwriters Subscribing To Lloyd's Policy No 621/PK1D00101 & Ors [2008] EWCA Civ 1206
- Freakley & Ors v Centre Reinsurance International Company & Anor [2005] EWCA Civ 115
- First National Tricity Finance Ltd v OT Computers Ltd [2004] EWCA Civ 653
- J. J. LLOYD INSTRUMENTS LTD. v. NORTHERN STAR INSURANCE CO. LTD. (THE “MISS JAY JAY”) [1987] 1 Lloyd's Rep 32
- Euro Pools Plc v Royal And Sun Alliance Insurance Plc [2018] EWHC 46 (Comm)
- Denso Manufacturing UK Ltd v Great Lakes Reinsurance (UK) Plc [2017] EWHC 391 (Comm)
- Quah Su-Ling v Goldman Sachs International [2015] EWHC 759
- Omega Proteins Ltd v Aspen Insurance UK Ltd [2010] EWHC 2280 (Comm)
- Kajima UK Engineering Ltd v The Underwriter Insurance Company Ltd [2008] EWHC 83 (TCC)
- Enterprise Oil Ltd v Strand Insurance Company Ltd [2006] EWHC 58 (Comm)
- Tarbuck v Avon Insurance plc [2002] QB 571
- TED BAKER PLC AND ANOTHER v AXA INSURANCE UK PLC AND OTHERS [2017] Lloyd's Rep IR 682
- IMMERZEEL v SANTAM LTD [2007] Lloyd's Rep IR 106
- COX v. BANKSIDE MEMBERS AGENCY LTD. [1995] 2 Lloyd's Rep 437
- Murray v Legal & General Assurance Society Ltd [1970] 2 QB 495
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Cases citing this case
3 later cases · 2 positive · 1 caution
Most senior citing decisions:
- Spire Healthcare Limited v Royal & Sun Alliance Insurance Limited [2022] EWCA Civ 17 distinguished
- Omair Ahmed & Ors v White & Company (UK) Limited & Anor [2025] EWHC 2399 (Comm) approved
- Spire Healthcare Ltd v Royal & Sun Alliance Insurance Plc [2020] EWHC 3299 (Comm) applied
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