Articles | May 11, 2020
One of the more difficult issues insurance policyholders face is when to notify carriers about claims. While experience tells us that sooner is almost always better, knowing what constitutes a claim is not as straightforward as it may seem. The definition of a “claim” varies depending on the carrier, policy type, and policy form, and it may include lawsuits, regulatory investigations or proceedings, written demands for damages, data incidents or a combination of these. Potential claims – or even circumstances that simply increase the possibility of a claim – sometimes warrant notifying your carrier.
Failure to provide notice on a timely basis may result in either loss of certain coverage or outright denial of otherwise covered claims. Late notice is not a precisely defined term but, generally, may be considered any period after that specified in a policy. However, many states also require that the carrier demonstrate that the late notice has caused it financial harm, meaning that the late notice did or will directly affect the amount of the paid loss.
In short, it is safe to assume that placing a carrier on notice as soon as you become aware of a claim or the circumstances that may give rise to a claim is the most prudent approach. However, you should consult with your legal counsel to determine the best course of action for the specific circumstances.
Here are our observations about timing notices depending on the types of coverage.
In addition to claims and circumstances that may give rise to a claim, you should file a notice with your carrier as soon as possible if, for example, you become aware of:
You should consider filing notice of these claims immediately, because we have observed that the longer an EPLI claim is outstanding, the more expensive it will be to resolve. This is especially true during times when hiring decisions may fluctuate and allegations of discrimination, retaliation, failure to hire and wrongful termination may arise.
During a moment of crisis, making tough decisions that balance the needs of key stakeholders can sometimes lead to greater risks (and claims) against insureds, their employees, and their organizations. Many policies include a “duty to defend” that is broader than the duty to reimburse claims. However, when deciding whether to take control of defense of a claim or tender it to your insurance carrier, you should refer to the policy as soon as possible to determine any time constraints.
Notice of a data event (or a social engineering fraud loss, if such coverage is provided under the policy) may trigger outreach and support by carrier’s professional expert team as a service included in the policy, so it is in your best interest to give the carrier notice of an event as soon as you become aware.
Generally, you should file a notice of loss as soon possible and a proof of loss within the timeframe specified under the policy. Timing and other obligations can vary by carrier and policy form.
Sponsors of public sector plans need to consult legal counsel to determine their specific state employment dishonesty bond requirements.
If you have questions about the value of notifying insurance carriers promptly about claims for any of the types of coverage listed above or concerns about the implications of giving notice of a claim, please contact your Segal insurance broker.
We’ll provide assistance to help you think through some of the coverage issues. In addition, Segal can help you prepare for filing a claim with an insurance carrier and determine what the carrier needs in response to the receipt of a claim, but only the insurance carrier can determine its final position. Because insurance policies are legal contracts, legal counsel always should be consulted if issues arise with carriers or claims.
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