Engineers should notify a PI insurer when they first become aware of a situation that could reasonably lead to a claim or require notification under the policy.
They do not necessarily need to wait for legal proceedings or a formal demand.
Examples can include:
- an allegation of a design error
- a significant defect
- unexpected rectification costs
- a client withholding fees because of alleged errors
- another project participant blaming the engineer
- a request to contribute toward a loss
- a serious complaint about professional services
Professional Indemnity policies usually contain notification requirements, and the exact wording should be checked.
Where a potential circumstance arises, contact the broker promptly so the facts can be reviewed and, where appropriate, notified to the insurer in accordance with the policy. Telling a broker does not automatically mean the insurer has been notified unless the notification is actually passed on in the required way.
Timing becomes particularly important when the policy is approaching renewal or the engineering firm is changing insurers.
If there is doubt about whether a matter is significant enough to notify, it is generally better to raise it promptly rather than waiting for the position to worsen.
For the legislative framework dealing with notification of facts that might later give rise to a claim, see the Insurance Contracts Act 1984, including section 40.
