When insureds report a claim to their carrier, the expectation is the claim will be covered and their assets and reputation be protected. While this happens the majority of the time, there are situations when the worst occurs and the claim is denied coverage. There are several reasons insurance carriers decline coverage on reported professional liability claims. One of the reasons claims are denied is due to the late reporting of the claim. Although late reporting is a cause for claim denial, it can be avoided by the insured.
Professional liability insurance policies require that all claims be reported in the policy period that the insured first becomes aware of the claim. This is also true for potential claims. Most carriers have wording in the policy that states the insured needs to report those incidents that the insured could reasonably foresee the incident may lead to claim. Failure to report these potential claims may lead to a denial in coverage.
It sounds easy and it should be easy for the firm to report claims and potential claims as soon as they are aware of them. Unfortunately, it is never easy. No firm wants to “think” they made a mistake or a client is unhappy with their services. In addition, some insureds think that the mere reporting of a claim or potential claim will increase their insurance premium, so the claim goes unreported. Not true. The mere reporting of a single claim or potential claim does not necessarily increase your premium.
Bottom line…you pay a lot of money to secure the policy, don’t jeopardize the coverage when you need it most. Report issues early. Perhaps the tips below will help you make sure your claim or potential claim is reported in a timely fashion:
- Meet monthly with your staff/lawyers to review the “tough” cases.
- Encourage your staff/lawyers to bring problem cases to your attention. Don’t punish.
- At renewal time, ask all lawyers in the firm to answer the potential claim and claim question on the renewal application. Have them sign and date it.
- Most carriers now have a claim hot line or help line that is available to insureds. Use it.
- Make sure that your staff/lawyers know how the insurance policy works and that claims and potential claims need to be reported immediately or they risk losing coverage. Identify a point “claims person.” Have all claims and potential claims directed to that person for review and reporting.