Is a spreadsheet sufficient notification of a claim?

Insurance Update

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In a recent High Court (Court) decision, the Court considered the notification provisions of a 'claims made and notified' professional indemnity policy (Walters (trading as Walters Law) V AIG Insurance New Zealand Limited [2015] NZHC 2701).

Mr Walters was a lawyer who acted for both vendors and purchasers in transactions concerning Blue Chip investment properties. 

In early 2008, Mr Walters was planning a partnership merger and did not expect to renew his professional indemnity policy beyond October 2008. At this time, the Blue Chip group had just collapsed. As a precautionary measure, Mr Walters compiled a spreadsheet listing all files where he had acted for both Blue Chip companies and investors on the same transaction. It contained little more than the names and address of the relevant parties, and whether the transaction had settled. The spreadsheet was forwarded to Mr Walters' insurer, AIG, with an email noting that: 

Whilst no claims have been brought against [Walters Law], they wish to notify this matter under their professional indemnity policy out of caution. 

In July 2009, the Hydes, Blue Chip investors, commenced proceedings against Mr Walters for breach of fiduciary duties, breach of contract and negligence in acting on a Blue Chip transaction. The claim was ultimately successful. 

Mr Walters made a claim under his professional indemnity policy as the Hydes were one of the clients listed on the spreadsheet sent to AIG. When AIG declined the claim, Mr Walters sought summary judgment. 

In order to have cover, there must be a claim made against the insured and the insured must also report the claim to the insurer during the period of insurance. The key question in this case was whether the spreadsheet submitted to AIG was sufficient notification of a claim. 

The Court confirmed that there is a need for more than just some fanciful or speculative chance of a claim:

There must be a 'substratum of underlying external fact, over and above [the insured's] mere concerns'. Further, and critically in this case, the insured must be aware of the circumstances that it is notifying. It is only circumstances of which the insured is actually aware which can be the subject matter of notification. 

In this case, the Court found that there was insufficient information contained in the spreadsheet to establish the substantial link between the notification and the claim actually made. The notification was simply a list of all of the clients. There was nothing more to suggest potential liability for a solicitor acting negligently when settling a conveyancing transaction. There was also insufficient evidence that Mr Walters was aware of circumstances which might have given rise to a claim of the sort subsequently made by the Hydes at the time the spreadsheet was submitted. 

As a result, the application for summary judgment was dismissed. 

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