By Zac Cregar, General Counsel & Managing Director of Claims
Experiencing a loss is stressful. Whether you’re looking at water damage to your home or a potential HR dispute at your business, the thought of beginning the claims process can feel daunting. You think to yourself, “I’ll just get to this later” or “I don’t want my premiums going up so I’ll just handle this without my insurer knowing about it.”
Unfortunately, when it comes to reporting a loss to your insurance carrier, “later” is never better. In fact, waiting too long to report a loss could jeopardize the coverage you have been paying for.
Policies are written in two general categories: occurrence or claims-made. To ensure you’re reporting losses appropriately, it’s important to know what type of policy you have.
Under an occurrence policy, any claims or potential losses are tied to a specific accident or event, such as an auto accident or a fire in your office building. Although you still have a duty to timely report the accident, you’re not limited to the dates of your policy coverage to report that event to your insurer. You can still get coverage from that policy even after it expires, so long as the occurrence happened within the dates of coverage.
But under a claims-made policy, any losses or potential losses must be reported before the policy ends, even if the new policy is with the same insurer. If your insurer is not made aware of a loss or that a loss might arise, you could be out of luck for receiving proper coverage for your loss.
It’s always in your best interest to report any loss as soon as it happens, regardless of your policy type. However, when it comes to claims-made policies, you’ll need to alert your insurer of any potential claims before the policy period ends––or within any extended reporting period thereafter ––even if you’re not positive you have a claim.
Submitting a notice of a potential claim is your way of saying to your insurer, “We’re not sure if this is or could be a claim, but we wanted to give you a heads-up.” If your insurer determines you do have a claim, it will revert back to the date of the notice of a potential claim. This will not only preserve your access to available coverage but can also provide you the opportunity to improve your company’s loss history by setting that loss farther back in time. Because insurers underwrite by looking in the rearview mirror, setting claims farther back in the distance can be advantageous.
It’s especially important to report any lawsuits immediately. Most lawsuits have a tight timeframe to respond and if your insurer has the right to assign your legal counsel—which is often the case—you’ll want to get started on that process right away.
Speaking with your broker can also help relieve some of the pressure of reporting a claim to your insurer. Since we’re not your insurer, we can discuss the claim before you make any decisions about reporting. And as your insurance advocate, we’re here to discuss these issues honestly with you, help you better understand what policies may be applicable, and game-plan next steps.