The short answer is “if in doubt, notify”. 

PI insurance is very different from (say) house insurance.  If your house is flooded, the loss is obvious – and current – and if you make a claim on your house insurance policy you expect some recovery of your loss.  But if a house you designed for others several years ago is flooded this year the “debate” may be how your design (then) contributed to that loss (now):  in making a notification under your PI policy, you are alerting your insurers of the opportunity to enter that debate.

The nature of PI insurance is that it is on a “Claims Made” basis:  the policy must be current when events which give rise to a claim first become known to the insured and are notified to the Insurer.  This applies whether or not the policy was current at the time that your actions (or inaction) allegedly caused the problems. 

The policy holder has a duty to notify as soon as circumstances are known.

Notifying a claim does not create a “black mark” against you;  if necessary, you can indicate that you have notified on a precautionary basis.  But failing to notify at the earliest reasonable opportunity may mean that the insurer could consider their position has been prejudiced, and decline the claim in whole or in part. 

  • You have an obligation to be open and honest to your insurer, and to assist them in responding to the claim.
  • Never admit any liability to your clients or other parties.
  • Never tell anyone that you’ve advised your insurer…but rather say that you are ‘seeking advice’

An example of situations where notification may be prudent:

  • If the client indicates that they may be seeking recovery from you for some reason
  • If a failure or defect has arisen, and you might be responsible for some of it
  • If you discover an error in your work that has or might later lead to problems
  • If you become aware of specific issues that may later lead to damages or loss
  • If there are disputes between others that you might be drawn into