When arranging or renewing professional indemnity insurance, the insured must make a fair presentation of the risk. This duty is separate from the requirement to notify claims and circumstances under an existing PI policy.
The same facts may be relevant to both processes, but completing one does not automatically satisfy the other.
The duty of fair presentation is set out in the Insurance Act 2015 and applies to non-consumer insurance contracts.
The insured must disclose every material circumstance it knows or ought to know. Alternatively, it must provide enough information to alert a reasonable insurer that further enquiries may be needed.
Material representations of fact must be substantially correct, while representations of expectation or belief must be made in good faith.
If the duty is breached, the insurer’s remedies under the Insurance Act 2015 depend on what it would have done had a fair presentation been made: it may be able to avoid the policy, impose different terms, or reduce the claim proportionately.
A material circumstance is information that would influence a reasonable insurer when deciding whether to offer cover and, if so, on what terms.
The information could affect:
Material information is not limited to matters that already amount to claims or notifiable circumstances. Something may be relevant to the insurer’s assessment of the risk even if it has not reached the notification threshold under the current policy.
A fair presentation allows the insurer to assess and price the risk properly. It can also help avoid coverage disputes if a claim is subsequently made.
A client may already have notified a claim or circumstance under its existing PI policy. While that notification may engage the protection of the current policy, it does not remove the need to consider the matter again at renewal.
If the information is material to the insurer’s assessment of the risk, it may also need to be included in the fair presentation. Brokers should not assume that the underwriter considering the renewal is already aware of information previously provided through the claims-notification process.
The reverse is also true. Disclosing a complaint or potential problem on a proposal form does not necessarily notify it under the policy currently in force. Notification must be made in accordance with the existing policy’s requirements.
Notification and disclosure are therefore separate processes. Information provided for one purpose should not be assumed to satisfy the requirements of the other.
Fair presentation gives an insurer the material information it needs to assess and price the risk and decide what terms to offer. Notification seeks to engage the protection of an existing policy for a claim or circumstance.
Brokers should consider both requirements separately and ensure that relevant information is provided through the correct process.
In relation to NBS PI policies notification of claims and circumstances should be given to and deemed to be properly made, if received by: Caytons Claims claims@caytonslaw.com 10A, Tower 42, 25 Old Broad Street, London EC2N 1HQ
See more of our Professional Indemnity Insurance: A Practical Guide for Brokers