A swimming pool company has not been able to recover all the cost of fixing faulty pools after it reached the limit of indemnity on its professional indemnity (PI) insurance policy. Euro Pools was unsuccessful in a bid to have some of the costs covered under the subsequent years’ PI policy.
The company specialises in installing swimming pools. These include specialist pools with moveable booms which can be raised or lowered to divide a pool into different areas.
In February 2007 Euro Pools became aware of a problem with the operation of some of the booms. It thought this was due to leaks in the stainless-steel air tanks which it hoped to fix by installing air bags. Euro Pools notified its insurer, RSA, of the circumstance under its 2006-07 PI policy (the first policy).
When Euro Pools renewed its cover in June 2007 (the second policy), it again notified RSA about the problem with the booms. It said this was being fixed by the installation of air bags, but wanted the problem logged on a precautionary basis.
The following May Euro Pools notified RSA that the air bags solution had failed and that it was going to fix the booms using a hydraulic system.
Euro Pools had reached its £5 million limit of indemnity on the first policy and wanted to claim for the installation of the hydraulic system under the second policy. However, RSA argued that all the repairs related to the first policy.
In the High Court, the judge agreed with Euro Pools that the first policy should respond to the problem with the air tanks and that the second policy should respond to the installation of the hydraulic system. She ruled that as Euro Pools were not aware of the need to install a hydraulic system at the time of the first notification, they could not have notified this, and therefore it formed a valid second notification in the second policy year.
RSA appealed successfully. The Appeal Court judges ruled that the original notification of the problem with the booms formed the PI circumstance in February 2007, and which covered all subsequent works to repair the fault. As a result, Euro Pools was unable to claim under the second policy.
“This case is important as it clarifies the scope of a notification to a professional indemnity insurance policy,” said James Burgoyne, Director – Claims & Technical, Brunel Professions. “Whilst the outcome in the present case was negative for the policyholder, generally this decision can be seen as a positive one. The alternative would be a lack of clarity whether subsequent developments in a case constituted separate notifiable issues. At best this would have required extensive analysis of every evolution of a case, and with multiple excesses being paid across multiple notifications relating to the same case. At worst, lack of cover due to no notification or late notification of evolutions of a case would have increased, not to mention the scope for disputes between different insurers regarding who should be covering what.”
Brunel provides a wide range of PII broking services to construction professionals. Click here to find out more or call Jonathan Filer on +44 (0)117 325 0752.