Tuesday, September 22, 2009

Insurance 101: Understanding the Basics of Liability Insurance, Part 3

By John L. Watkins and Guest Contributor Henry Shurling

It is sometimes said that insurance is one thing that you buy that you hope you never have to use. However, claims may arise. If they arise, there are a few things that need to be done.

1. Have a System in Place for Reporting Accidents or Incidents that Might Lead to a Claim. A business should have a system in place in which accidents or incidents that occur that might lead to a claim are reported to management. Note that some policies have provisions requiring such events to be reported to the insurer. The important thing is to get the information to a responsible person who understands what needs to be done.

2. If Demand Letter Arrives or a Suit is Filed, Notify the Carrier. If a demand letter arrives from another party or the other party’s lawyer, the carrier should be notified. If a suit is filed, it is important to get the suit papers to the carrier as soon as possible.

3. Some Notes About Notice. Some carriers are more aggressive than others about raising an improper or late notice defense. It is never safe to assume that a carrier will not raise such a defense. Many insureds provide notice by calling “the insurance company,” meaning they call their broker. As discussed in the first post, the broker is not the insurance company.

Many brokers assist their insureds with claims as part of their service, and will report a claim to the carrier on behalf of the insured. Many carriers will accept such notice. However, policies typically have specific provisions on how notice is to be given. The safest approach is to follow these provisions exactly. Note that the address for giving notice is often different from the address for paying premiums.

Most insurers will send prompt written acknowledgement of a claim. It is a good practice to confirm in writing with the claims professional that the company acknowledges it is on notice of the claim, and that no further action need be taken to put the company properly on notice.

4. Cooperate. Almost all policies have some form of “cooperation clause.” This is a clause that requires the insured to cooperate with the insurer in the event of a claim. Insurers will need information to deal with the claim. As a general proposition, provide it. If it appears that an insurer is making unreasonable requests, your broker or counsel may be able to intercede and avoid any potential dispute.

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