Question: Why advise an insurance carrier of any incident or circumstance that may give rise to a claim, rather than wait until an actual claim is made?
Answer: It is important for an insured to remember that all potential incidents or circumstances that may develop into a claim should be reported to the insurer. Not only does diligent claim reporting protect the insured’s interests, it can also provide an opportunity to head off possible future litigation. Additionally, because most policies contain an exclusion for incidents or circumstances that were known by the insured, a claim made at a later date has the potential to be denied under this exclusion.
Many Claims Made policy forms require the insured to notify the carrier of any incidents, and several specifically address this issue with what is commonly known as “Circumstance Reporting” provisions. These provisions vary from carrier to carrier but generally require the insured to advise the carrier if anything has occurred. Any claim subsequently made against the insured because of the incident or circumstance would then be treated as a claim first made and reported to the insurer at the time the incident was originally reported. How carriers treat these reported circumstances varies: some lock in the incident date forever while others set a time limit for the reported incident to manifest into a full claim. Carriers may undertake an investigation of the incident immediately, if in their opinion there is a likelihood that the incident will become a full claim.
When placing Claims Made coverage for your insureds, it is important that circumstance reporting is adequately reviewed and addressed. At Beacon Hill Associates, we continue to review the forms we work with so that we can provide you with the coverage and enhancements you client needs to be adequately covered.
