An insurance policy covers a contingency, that is, an event one does not know will occur. That requirement is ordinary in every line, but on a claims-made basis it takes a particular and much sharper form. Since the loss is the letter, a professional who knows a letter is coming knows its loss before the policy covers it. Every policy in this line therefore addresses that moment, and it addresses it by a mechanism that is neither an ordinary exclusion nor a simple declaration.
One must first see that the mechanism runs both ways, and that is what makes it useful rather than threatening. Forwards, it excludes from the new policy whatever the insured knew before taking it out: that is what contracts call prior knowledge, and the proposal-form question revealing it is almost always the last on the form. Backwards, it lets the insured attach a future loss to the current policy, by notifying not a claim but a circumstance likely to give rise to one. It is that second movement most professionals do not know about, and it is the one that saves them.
Notification of circumstances deserves precise description, because it is the only tool in this line allowing action before being attacked. A professional noticing an error, or sensing a client's dissatisfaction in terms foreshadowing a claim, can notify it to its insurer. The policy then in force takes note of that circumstance, and the claim later arising from it, even after the contract has ended, will be attached to that policy. A notified circumstance therefore fixes the year of attachment, and it does so at a moment of the insured's choosing.
That mechanism has a practical consequence to keep in mind at a change of insurer, since that is where it is worth most. A professional aware of a difficulty on a file at the moment of changing policies faces two opposite outcomes. Notifying it to the former insurer before cancellation attaches it to the former policy and it is covered, whatever the date of the letter to come. Not notifying it means it will be excluded from the new policy as prior knowledge, and the former will not respond since no claim arrived while it ran. The same difficulty, according to whether it was notified before a date, is either covered or not covered at all.
One must then know what constitutes a circumstance, since that is where files are argued. Contracts use formulas turning on knowledge of a fact likely to engage the insured's liability, and the assessment is most often made by reference to what a reasonable professional should have inferred. A client complaining about a file's slowness is probably not a circumstance; a client writing that it has suffered loss through an error, or an internal note recording an omission, very probably is, even without an explicit threat.
The failing this mechanism produces when badly understood must be added, and it is real: systematic defensive notification. A firm notifying every dissatisfaction manufactures a heavy claims history, will see its renewal terms deteriorate and may be refused wide retroactive cover, as seen in the previous lesson. The discipline is therefore not to notify everything, it is to recognize the moment a dissatisfaction becomes a circumstance, and to document it then.
The useful step comes to a rule of timing and a rule of content. The rule of timing: any known difficulty is handled before the cancellation date, never after, because afterwards it changes sides. The rule of content: a notification of circumstances sets out the facts, the dates, the people and the file concerned, and it characterizes nothing, admits no liability and puts no figure on anything. A professional notifying a circumstance properly has confessed nothing; it has merely dated its loss, which is precisely the grip the claims-made basis leaves it on its own risk.
An IT consultancy is due to renew its policy on December 31, 2025, and its broker obtains better terms with another insurer effective January 1, 2026. On December 8, 2025 the managing partner receives an email from a client: the migration delivered in September caused the permanent loss of three months of order history, the client says it has engaged a contractor to attempt reconstruction and writes that it "reserves its position". The managing partner judges reconstruction feasible and the client accommodating, and decides to wait and see. He signs the new policy on December 20, answering "no" to the question on known circumstances. On April 14, 2026 the client claims 850,000 euros. What happens, and what should have been done?
The file is lost on both sides, and it was lost on December 20 rather than on April 14. On the old policy, claims-made, no claim arrived before December 31, 2025: the December 8 email is not one, and nothing was notified, so that policy has nothing to attach and will not respond. On the new policy, the April 14, 2026 claim does fall while it runs, but it meets prior knowledge: on December 20 the managing partner knew that a piece of work had destroyed three months of a client's data, that the client had incurred costs to remedy it and that it reserved its position. That is very probably a circumstance within the meaning of the contracts, assessed not on what the partner hoped but on what a reasonable professional should have inferred, and his "no" on the proposal form worsens matters by moving it from the ground of exclusion to that of misrepresentation. What should have been done came to one action and one date. Notify the circumstance to the FORMER insurer before December 31, that is, while that policy still ran: the April 2026 claim would then have attached to the 2025 policy, covered whatever the date of the letter, and the new policy would have had to know of the file only as a properly declared prior matter. The notification would have cost nothing in the sense that it was not an admission: it sets out facts, dates and a file, it characterizes nothing and admits no liability. Two closing observations. The first is that the managing partner's reasoning, reconstruction seems feasible and the client seems accommodating, is a prediction about the outcome, whereas notification of circumstances asks for no prediction: it asks only for the observation that a claim is capable of arising. The second is that the change of insurer, presented as an improvement in terms, was the file's real risk factor, because it turned a known difficulty into a boundary between two policies.
- 01On a claims-made basis the loss is the letter: knowing a letter is coming means knowing your loss before the policy covers it.
- 02The mechanism runs both ways: it excludes prior knowledge from the new policy, and it lets a future loss be attached to the current one.
- 03A notified circumstance fixes the year of attachment, at a moment of the insured's choosing: it is the only grip it has on the date of its own loss.
- 04The same difficulty is either covered or not covered at all, according to whether it was notified before cancellation.
- 05A notification of circumstances sets out facts, dates and a file: it characterizes nothing, admits nothing and puts no figure on anything.