McManus & Ors v European Risk Insurance Company: Blanket Notification Revisited

In the recent case of McManus & Ors v European Risk Insurance Company [2013] the High Court revisited the validity of blank notification of circumstances which may give rise to an insurance claim, previously considered in J Rothschild Assurance plc v Collyear [1998].

The claimant solicitors (MSR) took over Runhams LLP in 2011 which had itself taken over the business of Sekhon & Firth Solicitors. MSR was insured with the defendant pursuant to a professional indemnity policy which required the claimant to notify the defendant of any claim “first made against any Insured during the period of insurance” or any “circumstances of which any Insured first becomes aware during the period of insurance.”

The claimant was subsequently notified of 17 claims against Sekhon & Firth brought by former clients. The claims all related to conveyancing work.

The claimant engaged risk consultants who reviewed 32 files and the results of a review by MSR’s own fee earners. The risk consultants found that the claims were similar and identified a pattern of breaches of duty. The report concluded that it was probable that other claims would be made.

The claimant sent a blanket notification letter to European Risk Insurance Company. The letter reported the claims already received, referred to the findings of the risk consultants, the claimant’s own investigations and listed files which it considered might be the subject of future claims. It also explained that the claimant could not be sure that other files were not affected.

The defendant accepted that valid notification had been given in relation to particular matters reviewed by the risk consultants, but rejected the notification in relation to the remaining files because the claimant had not identified a specific incident, fact, matter, act or omission which would give rise to a claim on each individual file. The claimant was unable to secure insurance on the open market, and sought declaratory relief from the court in the hope that it would enable them to do so.

Following the decision in J Rothschild Assurance plc v Collyear [1998] Deputy Judge Rose held that it was not necessary for the notification to be as prescriptive as the defendant contended. Provided circumstances exist which may give rise to a claim, and provided that those circumstances are notified, then any future claim arising out of those circumstances must be dealt with by the insurer duly notified. However, Deputy Judge Rose declined to give any declaration as to the precise scope of the claimant’s notification because he considered that the precise scope should be determined as and when it arises in the context of an actual claim.

The case reinforces previous case law that blanket notifications are likely to be construed in favour of the policyholder but serves as a reminder to policyholders to notify insurers promptly of circumstances which might give rise to a claim.

For further information or to discuss this article, please contact melissa.easton@edwincoe.com

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