When to Make an Insurance Claim
© 2006 Door & Access Systems
Publish Date: Fall 2006
Author: Naomi Angel
When to Make an Insurance Claim
He Who Hesitates Experiences Loss
By Naomi Angel, DASMA Legal Counsel
A recent decision by the Illinois Supreme Court illustrates the unhappy consequences of failing to inform an insurance carrier of a pending claim.
Two companies sued each other, claiming trademark violations. They were both insured by the same carrier. Their policies required that if a claim or suit was brought against the insured, the insured must immediately record the specifics of the claim and the date it was received, and notify the carrier. But both companies failed to notify their carrier for more than 20 months.
You Snooze, You Lose
The insurance carrier then filed a lawsuit asking the court to rule the insurer had no obligation to defend either policyholder because of their failure to timely notify the carrier. The trial court, appellate court, and Illinois Supreme Court all ruled that the insurance company did not have a duty to defend or indemnify either party.
The trial court said that the contract clearly required prompt notice; the claimants were asking the carrier to essentially rewrite the contract. Moreover, neither claimant had any excuse for failing to notify the carrier.
Insurance is a necessary evil. Companies pay insurance premiums year-in and year-out, hoping never to have to use it. All too often, when we actually have to make a claim against that insurance policy, we find out too late that something wasn’t done correctly, resulting in no coverage.
Which Policy for Which Claim?
As a door dealer, you probably have several policies. You should read them cover to cover so you understand the scope of your coverage, what you need to do, when to make your claim, and which policy applies.
For example, damage to company property will be covered under your property policy. If a third party makes a claim against your company, you may be covered by a general liability policy, an errors and omissions policy, a business interruption policy, a product liability policy, or some other sort of specialized policy.
Which Kind of Coverage?
Is your coverage “occurrence-based” or “claims-made”? Occurrence-based policies cover the insured for injuries that were alleged to have occurred during the policy period. Claims-made policies provide coverage for claims that are made during the policy period, regardless of when the alleged injury occurred.
The best way to understand the terms and extent of your coverage for any particular situation is to review and consider all of your potentially applicable policies so that you can find out how and to whom to make a claim.
Rules to Remember
Remember–every insurance policy requires notice of actual and threatened claims or lawsuits. Following these simple rules can reduce the likelihood that insurance coverage won’t be available when your company actually needs it.
· Know when notice must be given – and give it! Most general liability policies require you to notify the insurer of a claim or a potential claim “as soon as practicable.”
· If a lawsuit is filed against the policyholder, you may be expected to “immediately” notify the insurer and send all suit papers to the insurer.
· If required, submit a sworn proof of loss, documenting the circumstances of the claim and itemizing damages. Failure to follow this step can sometimes cause unnecessary coverage problems.
As evidenced in the Illinois case above, notice is the most fundamental reason for an insurer to deny coverage or initiate a major, expensive conflict about whether notice was adequate. At the same time, notice is the easiest coverage problem to avoid.
If a claim is complicated, don’t simply rely on your insurance agent or broker. Consult an insurance attorney who is also familiar with differences in state laws. The buck stops with you, the policyholder, to comply with the exact requirements in your policies for making the claim.
This article is provided solely for informational purposes and does not constitute legal advice. If you have specific questions or concerns about a legal issue, consult your company’s legal counsel for guidance.