While claims reporting may seem straightforward, it can be a complex matter at times. If you experience a claim, it is important to report it within a timely manner. Why is this important? Late reporting can increase claim costs and, depending on the type of policy involved, coverage can potentially be denied if a claim situation isn’t promptly reported to your insurance company. This is of particular importance when dealing with executive liability coverages such as professional liability, directors and officer’s liability, and employment practices liability.
Part of the sensitivity to timely claims reporting revolves around the fact that many executive liability coverages are written on “claims-made” insurance policy forms. This means that coverage is triggered when the claim is made against the insured and reported to the insurer prior to the end of the policy period (or extended reporting period if applicable). If a claim isn’t reported until after the end of the policy period or extended reporting period, no coverage would be available.
This differs from occurrence-based coverage that covers claims as long as the loss occurs during the policy period and is promptly reported – even if the claim wasn’t discovered until after the policy period concluded.
As an employer, ensuring that your management team communicates with one another regarding potential claims is of utmost importance. The reason for this is that when claims-made policies renew, it is common for the renewal application to ask if the insured is aware of any situation that may give rise to a claim. If the person completing the application isn’t aware of any issues, but a manager or supervisor in a different department knows of a situation, this can be problematic. Coverage could be in jeopardy should the claim be reported after the policy renews if the renewal application states that there were no situations present that could result in a claim.
No matter the form of the insurance, it is extremely important for insureds to report claims as soon as possible and include all details to your knowledge. Be sure to reach out to your agent or account manager if you have any questions on this!