Most professionals know to protect themselves and their clients with the purchase of a professional liability insurance policy, commonly referred to as an E&O policy. What most professionals don’t know or don’t care to know, is when and how to properly report a claim or potential claim to their insurance carrier.
Initially, the most important issue when reporting a claim is the timing of the notice to the carrier. All carriers have different reporting requirements but most state that the claim or potential claim must be reported to the carrier in the policy period YOU first become aware of the claim or potential claim. Some carriers are even more restrictive and will use the term “immediately report” or “as soon as possible after first becoming aware of the claim.” No matter the wording in the policy, the timing of the notice to the carrier is absolutely vital to the claim being covered under the policy. A delay in reporting the claim or potential claim to the carrier can lead to a declination of coverage due to “late reporting.” Late reporting is a term no insured wants to hear in a claim situation. Do not fall into the trap of thinking it will just go away, or hold off on reporting for fear that your premium will increase. Providing professional services for others unfortunately will give rise to a claim or potential claim. These must be dealt with immediately.
All carriers have slightly different policy wording with regard to the timing of claim reporting. The best way to reduce the possibility of a declination due to late reporting is to report the claim as soon as you first become aware of the claim or potential claim. Regardless of “how much time” the policy provides, immediate reporting of the issue to the carrier will be viewed as favorable by the carrier and the claims personnel. It may even provide a good night sleep for you!