Insurance can be a valuable business asset, but a key step to securing coverage in the face of a claim is to provide prompt and broad notice to insurers. In the event of a claim, insurers will consider whether they can deny coverage based on “late notice.” Therefore, corporate policyholders should employ the following best practices to protect and maximize their insurance asset:
- Receipt of a “claim” usually triggers a reporting requirement; therefore, policyholders must understand how the policy defines a “claim,” which is often broader than a lawsuit or written monetary demand.
- Prompt notice should be given to all insurers–primary and excess–even if the claim may be resolved within the primary policy’s deductible or below the excess carrier’s level.
- Companies should have a procedure to ensure all legal proceedings and demands (written and oral) are transmitted to a designated corporate officer for appropriate action.
- Policyholders should ask their insurers to include in the policy those provisions that:
- Identify the specific corporate officer(s) who must have knowledge of a claim before the notice obligation is triggered. Such a provision helps avoid a denial when a low-level employee receives a claim but does not report it to management.
- Bar the insurer from asserting a late notice defense unless the insurer proves it is materially prejudiced by the delay.
- Prohibit the insurer from asserting a late notice defense if the policyholder is prevented from providing notice based on a request from law enforcement to keep the claim confidential.