Late Notification
The insurer alleges that a claim or circumstance was not notified when required or should have attached to an earlier policy period.
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Professional Indemnity Cover
Has Your PI Insurer Refused to Defend or Indemnify You?
A client has made a claim against you. Now the insurer you expected to protect the business says the policy does not respond. That can turn one serious dispute into two.
An insurer’s declinature is its interpretation of the insurance contract. It should be tested against the policy wording, notification history, professional work, underlying allegations and the precise facts relied upon by the insurer. Insurance Dispute Service can analyse the coverage dispute alongside the liability claim you are already facing.
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PI & Liability Claims
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Start With the Contract
A refusal of indemnity is not automatically the final answer.
The insurer may ultimately be correct. But that conclusion should follow from the insurance contract and evidence — not simply from the fact that a declinature letter has been issued.
The first task is to understand exactly what the insurer says falls outside cover and whether the wording it relies upon actually produces that result.
The insurer’s letter states a coverage position. The policy determines whether that position can be sustained.
That distinction is particularly important where the refusal depends upon disputed facts, an earlier notification, alleged non-disclosure, the interpretation of an exclusion or the true nature of the professional work.
Define the Problem
What has the insurer actually refused?
“Cover refused” can conceal several different positions. Before challenging the insurer, establish exactly which part of the protection is in dispute.
01 / LIABILITY
Indemnity for the claim
The insurer says it will not indemnify the insured for a settlement, judgment or other insured liability arising from the professional claim.
02 / COSTS
Defence costs
The insurer disputes whether legal, expert or other defence costs fall within cover or refuses to continue funding them.
03 / CONTROL
Defence involvement
The insurer declines to appoint solicitors, take control of the defence or participate in the claim in the way the insured expected.
04 / PARTIAL COVER
Only part of the claim
Some allegations, heads of loss, individuals, entities or defence costs may remain covered while others are said to fall outside the policy.
Read the UK Policy
Do not assume every PI policy contains the same “duty to defend”.
Professional indemnity policies used in the UK can deal with the defence of claims in different ways. Whether the insurer must appoint solicitors, reimburse costs, advance costs, approve expenditure or control the defence depends upon the particular wording.
The important question is therefore not simply “Why won’t my insurer defend me?” It is: “What protection did this insurance contract promise once this type of claim arose?”
Defence Costs
Are they expressly insured, and are they within or additional
to the indemnity limit?
Consent
Must costs be incurred with the insurer’s prior consent or
agreement?
Appointment
Does the wording give the insurer rights concerning selection
or instruction of lawyers?
Control
Who has contractual authority over defence strategy,
negotiations and settlement?
Reimbursement
Does the wording reimburse insured costs or require them to be
advanced while the claim proceeds?
Mixed Claims
How are costs dealt with where some allegations may be covered
and others are not?
Why Cover May Be Refused
The reason for declinature determines the defence to it.
A dispute about notification requires a different analysis from a dispute about an excluded professional activity. The insurer’s grounds should therefore be separated rather than answered with a general assertion that the claim ought to be covered.
Prior Circumstances
The insurer argues that facts known before inception or renewal should have been disclosed or notified under earlier insurance.
Fair Presentation
The insurer alleges that material information was omitted, misrepresented or insufficiently disclosed when the commercial policy was placed or renewed.
Excluded Professional Work
The activity, project, jurisdiction, service or liability giving rise to the claim is said to fall within an exclusion or outside the insured professional business.
Policy Year or Retroactive Date
The insurer says the claim belongs to another period of cover or that the relevant professional work falls outside the available retroactive protection.
Policy Condition
The insurer relies upon an alleged breach involving cooperation, claims control, consent, notification or another contractual requirement.
Read the Decision Properly
A declinature should identify more than a conclusion.
The reasoning matters. The objective is to move from: “the insurer says there is no cover” to a precise understanding of the contractual and factual route by which it says that conclusion is reached.
Policy wording → relevant facts → contractual consequence.
If one of those links is missing, the reasoning needs further
examination.
01
Identify the insuring clause
Start with the cover that the policy positively grants before moving directly to exclusions and conditions.
02
Identify every clause relied upon
Ask which definition, exclusion, condition, endorsement or notification provision the insurer says changes that initial grant of cover.
03
Identify the factual proposition
What does the insurer say happened? A coverage argument cannot sensibly be tested until the factual case supporting it is understood.
04
Compare that proposition with the evidence
Contemporaneous emails, proposal forms, renewal records, notification correspondence and the underlying professional file may support, qualify or contradict the insurer’s account.
05
Test the legal consequence
Even if a factual breach occurred, it does not follow that complete avoidance or refusal is necessarily the contractual or statutory consequence.
Insurance Act 2015
A breach does not always entitle an insurer to reject everything.
For insurance contracts within its scope, the Insurance Act 2015 significantly affects some of the grounds insurers may seek to rely upon. The precise outcome remains highly dependent upon the policy and facts.
Schedule 1
Fair presentation remedies can be proportionate
For a qualifying breach of the duty of fair presentation that was not deliberate or reckless, the remedy depends on what the insurer would have done if a fair presentation had been made. Depending upon the evidence, that can mean avoidance with return of premium, application of different terms, or a proportionate reduction where a higher premium would have been charged.
Section 11
Some unrelated breaches cannot simply defeat the claim
Section 11 can restrict reliance on certain terms intended to reduce the risk of loss of a particular kind, at a particular place or at a particular time, where the insured shows that the non-compliance could not have increased the risk of the loss which actually occurred. Its application depends upon the type of term involved.
Section 13A
Valid insurance claims must be paid within a reasonable time
Insurance contracts to which section 13A applies contain an implied term requiring sums due to be paid within a reasonable time, including reasonable time to investigate and assess the claim. An insurer with reasonable grounds for disputing a claim is not in breach merely because payment is withheld while that dispute continues, although its claims-handling conduct can still be relevant.
These provisions do not mean every refusal is wrong.
They mean the precise statutory and contractual consequence
needs to be identified rather than assuming that every alleged
breach automatically removes the entire policy.
If the Insurer Says the Risk Was Mis-Presented
Ask what the insurer says it would actually have done differently.
For relevant non-consumer insurance, an allegation of non-disclosure or inadequate presentation should not end with the statement: “We would have underwritten this differently.”
The Insurance Act remedies depend upon the nature of any qualifying breach and, for a breach which was not deliberate or reckless, the underwriting counterfactual can become crucial.
No policy at all
Would the insurer genuinely have declined to write the risk on
any terms?
Different wording
Would the insurer have written the risk but imposed another
term, restriction or exclusion?
Higher premium
Would the same or amended cover have been available if a higher
premium had been charged?
Evidence
What underwriting material supports the counterfactual position
the insurer now advances?
Defence Costs
The immediate problem may be funding the defence before liability is ever decided.
A substantial negligence claim can require legal advice, experts, document review and procedural work long before anyone knows whether the professional will ultimately be liable.
If the insurer withdraws or refuses funding, the policy needs to be examined carefully to establish what protection was promised and what conditions govern defence expenditure.
Costs inside or outside the limit?
Establish whether defence expenditure erodes the available
indemnity limit.
Prior consent
Check whether costs require the insurer’s prior approval
and what happens if urgent expenditure is necessary.
Panel lawyers
Determine whether the insurer has contractual rights relating
to the lawyers appointed to defend the claim.
Experts
Establish how expert fees and other necessary defence costs are
dealt with.
Partially covered claims
Consider how defence expenditure is treated where allegations
include both covered and disputed matters.
Interim funding
Where coverage remains disputed, understand whether any defence
cost arrangement continues while that dispute is resolved.
Claims Handling Matters Too
The insurer's reasoning is important — so is the way the claim has been handled.
Insurance coverage disputes can legitimately require detailed investigation. But an insurer does not acquire an unlimited period in which to leave an insured uncertain about its position.
The contractual and regulatory position depends upon the particular insurance and insured.
FCA ICOBS 8.1.1
Prompt and fair claims handling
Where ICOBS applies, insurers must handle claims promptly and fairly, provide appropriate information about progress and not unreasonably reject a claim.
Insurance Act 2015 — Section 13A
Payment within a reasonable time
For insurance contracts to which the provision applies, sums due must be paid within a reasonable time, which includes reasonable time for investigation and assessment.
Reasonable dispute
A genuine coverage dispute can justify non-payment while it continues
Section 13A recognises that an insurer may have reasonable grounds to dispute whether anything is payable. The existence and conduct of that dispute therefore matter.
After a Refusal
Turn the declinature into a list of issues that can actually be tested.
A coverage challenge is much stronger when it responds directly to the insurer’s reasoning rather than simply repeating that the professional expected to be insured.
Solicitors Already Involved?
A withdrawal of indemnity can change an existing defence arrangement.
Sometimes solicitors have already been appointed before the insurer finally refuses indemnity. If that happens, the professional needs clarity about what work continues, who will fund it and whether the existing lawyers remain instructed.
Already Have Insurer-Appointed Solicitors? →
Who remains the solicitor’s client?
When does insurer funding cease?
What happens to work already undertaken?
Are urgent claimant or court deadlines approaching?
Does the insured need independent coverage advice?
How We Can Help
Analyse the refusal without losing control of the claim it was supposed to cover.
The strongest approach is usually to understand the coverage dispute and the underlying liability dispute together. That makes it possible to identify where the insurer’s reasoning can actually be challenged while protecting the professional’s defence.
01 / POLICY
Analyse the declinature
Break the insurer’s decision into the insuring clause, definitions, exclusions, conditions and factual propositions on which it relies.
02 / EVIDENCE
Build the insurance chronology
Organise placement, renewal, notification and claims evidence to establish what actually happened and when.
03 / COVERAGE
Test the insurer's reasoning
Compare the refusal with the policy wording, relevant statutory provisions and the underlying professional allegations.
04 / STRATEGY
Protect both disputes
Prepare the coverage challenge while keeping the underlying liability defence, evidence and procedural position under control.
Common Questions
PI insurer refusing indemnity
Does an insurer's rejection mean there is definitely no cover?
No. It means the insurer has adopted a coverage position. Whether that position is sustainable depends upon the policy wording, facts, insurance history and applicable law.
Does my insurer automatically have a duty to defend me?
Not in a universal sense. UK professional indemnity policies can deal differently with defence costs, appointment of lawyers, claims control and indemnity. The individual policy wording must be examined.
Can the insurer refuse because I notified the claim late?
Notification can be fundamental in claims-made professional indemnity insurance, but the relevant policy wording, when the claim or circumstance arose, previous notifications and the insurance chronology all need to be established.
Can the insurer avoid the whole policy for non-disclosure?
Not automatically. For relevant non-consumer contracts governed by the Insurance Act 2015, the remedy for a qualifying breach of the duty of fair presentation depends upon the nature of the breach and what the insurer would have done if a fair presentation had been made.
What if the insurer relies on a policy condition that had nothing to do with the loss?
Section 11 of the Insurance Act 2015 may be relevant to certain terms designed to reduce the risk of a particular type of loss, at a particular place or at a particular time, where the insured can show the non-compliance could not have increased the risk of the loss that actually occurred. It does not apply to every policy term.
What happens to the negligence claim while I dispute insurance cover?
It continues. Pre-action deadlines, limitation, court directions, evidence and defence preparation must therefore be managed independently of the coverage dispute.
Can the insurer be liable for taking too long to pay?
Section 13A of the Insurance Act 2015 provides an implied term, for contracts to which it applies, requiring sums due under an insurance claim to be paid within a reasonable time. Reasonable time includes time for investigation, and an insurer may have reasonable grounds for disputing liability.
Can IDS act as my solicitor against the insurer?
No. Insurance Dispute Service provides insurance dispute analysis, claims analysis, case preparation and litigation support. Reserved legal activities must be undertaken by somebody with the appropriate regulatory authorisation.
Important information
Professional indemnity policies vary significantly between insurers, professions and policy years. Whether an insurer must fund defence costs, appoint lawyers, control the defence or indemnify liability depends upon the individual contract and circumstances.
The Insurance Act 2015 may affect issues including fair presentation, warranties and certain terms relating to risk. Its precise application is fact-sensitive and not every policy term falls within every statutory provision referred to on this page.
Where applicable, FCA ICOBS claims-handling rules require insurers to handle claims promptly and fairly and not unreasonably reject a claim. The regulatory position depends upon the type of insurance and customer involved.
Insurance Dispute Service provides insurance dispute analysis, claims analysis, case preparation and litigation support. Public Access enables suitably registered barristers to accept direct instructions. Conduct of litigation is a separate reserved legal activity and appropriate authorisation is required where that work is undertaken on a client's behalf.
This page provides general information and is not legal advice. No particular outcome is guaranteed. Policy notification requirements, limitation periods, pre-action deadlines and court deadlines should be checked for the individual matter.
PI Cover Refused?
The insurer has made its decision. The next question is whether the policy supports it.
We can examine the declinature, policy wording, notification history and underlying professional claim to identify the coverage issues and the strongest route forward.