Boardroom Briefing November 2019
In the wake of the Royal Commission into Banking and in the midst of the Royal Commission into Aged Care, we are all too aware of the potential claims that these inquiries can throw up. But in this challenging time there is an added complication on the renewal of your D&O and PI insurance.
Take this increasingly common scenario – a notice to produce documents lands on your desk from the Commissioner. While you are busy collating documents, you are about to change insurers on renewal and the incepting insurer has imposed a specific matters exclusion which excludes any claims going forward arising out of, based upon or attributable to the Royal Commission. Where to from here?
The comfort of a blanket: it is imperative that you notify all circumstances arising from the documents provided to the Commission to your current, albeit expiring, insurer because these will in all likelihood be excluded by the incepting insurer’s specific matters exclusion. In other words, it is vital that everything excluded in the future under the specific matters exclusion is notified now to the current insurer as a blanket notification. Why? Because if best efforts are not made to achieve a symmetry between the notifications and the exclusion, there is the potential for future claims to fall between the two insurance policies.
Blanket, bulk or laundry list notifications are not an altogether easy exercise. Insurers often resist accepting such notifications. There is persuasive case law, however, which supports these notifications on the basis that insurers cannot reject them simply because it is a large number of circumstances that do not precisely identify the circumstances which may give rise to a claim. The upshot – just because an insurer can’t see how a future claim might arise does not necessarily entitle an insurer to decline a notification of circumstances.
If an incepting insurer is applying a specific matters exclusion to corral Royal Commission claims to a particular policy year, then no insurer should be surprised by a correspondingly broad notification arriving on its desk. In other words, a specific matters exclusion and an extensive notification are two sides of one insurance coin. In any event, as we know at Lockton from experience, the future is an insured’s best friend; blanket notifications might be rejected by insurers as lacking sufficient detail but if those circumstances subsequently give rise to a claim, then it must have initially been a valid notification.
In brief: the best insurance renewal response to a specific matters exclusion, arising from a Royal Commission or otherwise, is to make sure that you make an extensive notification to your current insurer. Your Lockton broker can help you frame your bulk notification, negotiate to confine the specific matters exclusion with the incoming insurer and work through any current insurer objections to your notification. Blanket notifications are a legitimate exercise by you and your broker to protect your interests under your professional lines policies.