Brokers play a vital role when notifying insurers about potential claims as they can identify when an insurer might take issue with a notification for being too vague, Honan says. 

A notification needs to be made to the insurer quickly and should be as detailed as possible. When brokers make notifications on behalf of insureds, they ought to seek out all available information, Honan Senior Claims Executive Vesna Koteska says. 

"Drafting notifications and providing all the appropriate information, no matter how vague, is key to unlocking cover under the policy,” Ms Koteska said. “At Honan, we take this very seriously.” 

Brokers are privy to unique notifications from clients when there is a situation that may give rise to a claim, she says, as well as the reactions from insurers to those notifications.  

“This is a complex and evolving area, and we’ve observed that insurers are scrutinising all aspects of the claims process,” she said, adding that a “paradigm shift” is under way in insurer’s perception of an acceptable notification of circumstances which may give rise to a claim. 

Insureds are required to disclose, in writing, to the insurer, any facts that might give rise to a claim as soon as they become aware of the circumstance in question, to help ensure cover. 

“A notification is merely a situation where the insured could become liable,” Ms Koteska said. “The legislation around what constitutes a notifiable event is vague, but in theory, anything which could lead to a dispute and claim on the policy, ought to be notified.”   

Past cases have shown that very broad and unspecific “blanket” notifications present practical issues for claims handlers, underwriters and brokers leading up to renewal because it becomes extremely hard to assess the risk.  

"Notifications of facts or circumstances that may give rise to a claim must be sufficiently detailed and comprehensive so that the insurer is well aware of how the circumstance could lead to a claim, who the likely claimant is, and how the insured may have breached their duties etc,” she said. 

When a “broad” notification is accepted, insurers chase up exact details at renewal to appropriately assess and price the risk, such as when a company goes into liquidation and has a runoff policy in place and a broad notification of a circumstance is made because there are no further details available at the time. 

Other past cases support that notification of facts concerning a “wide problem” can be made under the legislation.  

"Even if an insured isn’t exactly sure how a circumstance may lead to a claim, the insurer should accept it and simply request further information,” Ms Koteska said.  

A common example of this is companies, directors or board members being questioned by regulators.  

“It isn’t always obvious how this could lead to a claim, as defined in the policy, but insurers should not withhold indemnity pending further information where there has been no non-disclosure by an insured.” 

Honan says providing as much information as possible when a notification is vague should be enough for the insurer, and providing things like media articles on a director who may have been negligent “should be enough for the insurer to connect the dots on how a very vague circumstance could lead to a claim”. 

Ms Koteska warns though that "not every notification can be likened to another,” and providing media articles or expert opinions is not always possible. 

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