The case of McManus and Others v European Risk Insurance Co  EWHC 18 (Ch) considered whether a professional indemnity insurer was correct to reject a blanket notification of 5000 claims under a claims-made policy and the level of detail reasonably required to constitute notification.
Members of a firm of solicitors, McManus Seddon Runhams (MSR), brought a claim against European Risk Insurance Co (E), their Professional Indemnity Insurer, following a blanket notification of claims within their letter to E dated 21 September 2012 (the Notification Letter). The Notification Letter estimated that there were about 5000 files or case matters which could potentially contain evidence of malpractice, negligence and breach of contract. The Notification Letter did not set out the individual client, specific transaction or specific nature of the circumstance but enclosed a spreadsheet, listing the matters.
The case is unusual in so far as MSR contested the issue of the validity of the Notification Letter at a time before any claim alleged to arise from circumstances notified had actually been made.
It is nonetheless a comforting decision for lenders as Rose J held that MSR had validly notified their insurer of possible claims even though they had not identified particular defects in specific files. Provided circumstances giving rise to a claim exist and are notified, then all future claims arising out of those circumstances should be dealt with by the insurer. This trend had already been established in two previous cases on blanket notifications [J Rothschild Assurance plc & Ors v Collyear & Ors  CLC 1697 and HLB Kidsons (a firm) v Lloyd's Underwriters  EWCA Civ 1206] and therefore looks set to continue.
Points for lenders to consider
- 'Block' or 'blanket' notification is particularly important now, at a time when limitation is a key issue for lenders, allowing the notification of multiple claims and enabling the lender to protect its position.
- It must be noted that block notification does not prevent the expiry of limitation; it merely notifies an insured/their insurer of the existence of the potential claims. The limitation clock does not stop running and primary limitation will still end; either six years from the date of the breach in contract or for an action brought in tort, six years from the date the damage is suffered.
- The Courts are still unwilling to grant declaratory relief. Rose J concluded in McManus that it would not be fair to grant a declaration that each of the 5000 matters had been validly notified by MSR. Whilst the block notification itself was held to be valid, the decision in McManus means that the validity of each claim-made notification to MSR is to be taken on a case-by-case basis by E (i.e. to be reviewed afresh by the insurer in the context of each actual claim brought). This could result in greater uncertainty for all parties concerned: whether the lender bringing the claim against an insured, the insurer or the insured.
However, McManus confirms the position previously adopted by the Courts, concluding that a block notification of claims is likely to be deemed valid even where particular details in specific files have not been identified. The relatively lenient approach to block notification by the Courts therefore continues into 2013. It will of course remain to be seen what approach is taken on a case-by-case basis, i.e. what arguments are raised by insurers when contesting whether a claim has been validly notified.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at February 2013. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.
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