HLB KIDSONS V LLOYD’S UNDERWRITERS

[2008] EWCA Civ 1206, Court of Appeal, Lord Justice Rix, Lord Justice Toulson and Lord Justice Buxton, 31 October 2008

Insurance (professional indemnity) – Policies requiring assured to give notice in writing as soon as practicable of any circumstances of which it became aware – Whether assured became aware of circumstances – Whether valid notification given to insurers – Whether clause constituted a condition precedent to the insurers’ liability

The assured, a firm of accountants, owned a company, S@FI, which marketed tax avoidance schemes. The claimants were insured against liability under three professional indemnity policies which incepted on 1 May 2001 and terminated on 30 April 2002. The policies were written on a claims made basis. General Condition 4 provided that: “The Assured shall give to the Underwriters notice in writing as soon as practicable of any circumstance of which they shall become aware during the period specified in the Schedule which may give rise to a loss or claim against them. Such notice having been given any loss or claim to which that circumstance has given rise which is subsequently made after the expiration of the period specified in the Schedule shall be deemed for the purpose of this Insurance to have been made during the subsistence hereof.” In August 2001 the assured considered concerns that had been voiced by an employee that the products were flawed, and wrote to its brokers on 31 August 2001 setting out those concerns. Thereafter four presentations were made to the underwriters: (1) on 27 2001, when the letter was given to them; (2) on 17-18 October 2001, when the letter was resent but this time accompanied by details of five cases and a claims bordereau, although at this time the assured believed that there were no problems with its products; (3) on 18-19 April 2002, to the leading Lloyd’s underwriters and the companies market, consisting of the earlier material and a further letter dated 28 March 2008; and (4) to the Lloyd’s market, consisting of the material in the April 2002 material.