By: Lisa Hartman
To strike a balance between your desire for a clean claims history and your insurer’s need for early notice, understanding how to approach potential claims is key.
Your organization and its property and casualty insurer have made a pact. You pay a premium which is partially based on your claim history and the insurer covers any specified losses for incidents that occur during the contract term. It is in your best interest to have fewer claims on your claim history. It is in the insurance company’s best interest, however, to have sufficient time to make defense preparations for any resulting lawsuit, so the insurance policy generally includes a requirement that the insured give notice of any incident that “may” result in a claim at “first knowledge” of its occurrence.
The easiest case for notice involves a situation where an accident or other incident occurs on your property, and you are fairly certain it will result in a full-fledged claim. You report it to your insurance carrier. The insurance carrier assigns an adjuster and it immediately begins investigating and adjusting for the incident. Later, you receive notice of a lawsuit from an attorney, which you immediately send to your insurance carrier who assigns counsel and assumes defense of the case. Result - legal costs and judgments are paid under your insurance policy without a problem.
Incidents and accidents may happen frequently, however, and some may be minor or inconsequential. If there are no injuries, you may be inclined to hold off on reporting an incident to your insurance company to prevent another claim from appearing on your claim history. This could be a costly mistake if you are wrong and a claim results. Your insurer may deny coverage under the policy when it discovers you had prior knowledge of the incident but did not report it, jeopardizing the insurance company’s ability to defend.
So, what is the best way to reconcile your conflicting interests with your insurer in those cases? Questionable incidents should be reported to your insurance carrier as "notice only". Be clear in your statement that your notification of the incident is for reporting purposes only. If there's a slim but possible chance a claim could result, you should provide all relevant information in a cover note and request that the insurer investigate the incident on the insured side only with explicit instructions to the insurer that it should not contact the potential claimant at this stage. This ensures that both you and the carrier are prepared in case an unexpected lawsuit is filed before the statute of limitations expires. Once a claim number has been assigned to your “notice only” incident, follow up with the insurance carrier to make certain that the claim does not carry a reserve and that the claim shows as closed on your loss experience report.
Balancing a desire for a clean claim history with an insurer's need for preparedness requires careful navigation. The "notice only" method offers a strategic solution, promoting open dialogue with insurers. This ensures potential risks are addressed, without letting minor incidents compromise your record.