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INCORPORATED LAW SOCIETY OF IRELANÓ
Vol. 76 No. 6
July/August 1982
If in Doubt — Notify
I
N an age in which the public is increasingly — and
j rightly — aware of its right of redress, professional in-
demnity insurance is all the more imperative a protection,
for both practitioner and public alike.
Practitioners may not all be aware of a significant
difference which exists, under certain professional indem-
nity insurance policies, between the obligation to notify
insurers immediately of possible claims which come to the
notice of the insured during the currency of the operation
of the policy and the obligation to notify such possible
claims on the
annual renewal
of the policy.
The wording of at least one of the policies marketed in
Ireland imposes an obligation on the insured, during the
currency of the annual cover, to give immediate notice to
the insurer of any circumstance of which the insured shall
become aware which seems
likely to give rise
to a claim.
Policy cover under professional indemnity insurance
policies is not continuous and a duty is imposed on every
insured to disclose to an insurer all material facts relating
to any insurance each time a professional firm applies for
renewal of its professional indemnity cover.
One of the usual questions asked by insurers, when
\ inviting renewal of the annual insurance, enquires whether
any principal or partner, after enquiry, is aware of any
matter involving any circumstance which has resulted in a
claim or
which may give rise
to a claim against thefirm or
their predecessors in business or any of the present or
former partners, in respect of liabilities to be covered by
the proposed insurance.
It will be noted that the words "may give rise to a claim"
used on the occasion of the annual renewal are less precise
than the words "likely to give rise to a claim" which are
relevant during the currency of some policies. The reason
for the distinction is that it has been held that
every
circumstance is material which would influence the
judgment of a prudent insurer in fixing a premium or
determining whether he will take the risk and that insurers
need to weigh up the value of claims they may have to meet
before they assess the premium appropriate for the wide
policy cover which is given.
For this reason, a high degree of care must be exercised
on the occasion of the completion of the proposal for the
renewal of a policy.
An equal degree of care must be exercised during the
currency of certain policies in recognising potential
difficulties in cases which are likely to give rise to a claim.
There is a natural tendency to defer notifying an insurer of
circumstances which may ultimately be cured and in
which no claim may, in fact, arise but insurers are well
used to being notified of incidents where no claim at all is
eventually made and the cardinal principle at all times
should be "if in any doubt, notify".
The sanctions which the insurers are entitled to impose
in the event of non-notification on renewal include the
exclusion of a particular claim from cover, or even the
total withdrawal of cover, not merely for the claim when
notified, but in respect of any claims arising during the
appropriate annual period, even where these may have
been notified at the time of renewal.
It should, in particular, be appreciated that failure to
disclose circumstances which may give rise to a claim
may wholly invalidate the contract of insurance for the
next, or any succeeding, period of insurance.
The cover offered varies considerably between the
several insurers active in the field of professional
indemnity and care should be taken to ensure that the best
and most appropriate cover is obtained.
Consideration of such matters raises the further
important but probably insufficiently appreciated
question of the liability of practitioners whose name
appears on afirm's letterhead but who are not, in fact, full
proprietorial partners. Understandably, getting one's
name "on the notepaper" has long been regarded by the
younger solicitor as being a significant and most desirable
step up the professional ladder; it is seen as an expression
of confidence that thefirm or principal is prepared to hold
out the individual's presence as an inducement to existing
or prospective clients. But such a compliment has,
inevitably, its drawbacks. All too few solicitors, anxious to
see their names in print on theirfirm's notepaper, consider
the practicalities involved. Apart from the obvious
necessity of procuring from the principals of the firm a
proper indemnity in respect of the firm's liabilities, the
non-proprietorial "partner" should consider carefully
what may be the consequences of such publicity upon any
professional indemnity insurance he may require in his
own right later in his career.
A non-proprietorial partner, engaged in afirm at a time
when a claim arises against that firm in respect of alleged
professional negligence, but who subsequently sets up in
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