Read key elements about reporting business and commercial insurance liability claims. 
Learn why time is crucial in reporting business and commercial insurance liability claims.
Last month’s blog, “Protect Your Interests with R E P O R T,” provided a framework for business and commercial insureds with respect to reporting property losses. Today’s blog focuses on key elements all business and commercial insurance policyholders should be aware of in the reporting and filing of liability claims.
First and foremost is timely notice. The standard general liability policy requires the insured to notify the insurer as soon as practicable in the event of an occurrence, claim, or suit. This applies to actual liability claims against you, your business or commercial entity, as well as reasonable knowledge of potential liability claims. You’ve purchased business and commercial liability insurance for protection, so don’t jeopardize that protection by failing to give timely notice.
Unlike property losses, liability claims involve a third party. Do not admit liability for damage or injury. Doing so hampers your defense and may also constitute a breach of the insurance contract. Promptly contact your independent insurance agent or insurance company directly and allow the insurance company to perform its job of investigating the claim. Closely aligned with not admitting liability is do not compensate or pay-out-of-pocket for a third party’s injury or loss. What appears to be a minor slip and fall accident or auto accident involving a third party could morph into a more serious and costly claim. The standard general liability policy prohibits any insured from making any voluntary payments or incurring expenses, other than for first aid, without the insurance company’s consent.
Fully cooperate with your insurance company. This involves providing basic information from the who, what, where, when, and how of an accident, including providing any documents that may assist in the investigation and/or settlement of the claim, to attending trials. The insured should remain in regular contact with the insurance company and aid the adjuster or defense counsel in the insured’s defense.
Beyond General Liability insurance, business and commercial insureds often require additional liability insurance coverages. Consider Products/Completed Operations Liability, Directors’ and Officers’ Liability (D&O), Professional Liability (E&O), Employment Practices Liability (EPL), and Cyber Liability. The insured is required to adhere to the same basic claim-reporting practices highlighted above for the General Liability policy (timely notice, do not admit liability or make voluntary payments, fully cooperate with the insurer). Additionally, note that these exposures involve tail risks. Long-tail risks may be described as risks for which liability does not reach final settlement for a lengthy period of time beyond the term of the policy. Long-tail risks also refer to exposures for which there is a significant lag between a product exposure or wrongful act that gives rise to a liability claim and the insured’s awareness of a claim. It is very important for business and commercial insureds with long-tail risk exposures to understand that insurance policies designed to address these exposures are commonly written on a claims-made basis, rather than an occurrence basis.
One key coverage trigger for a claims-made liability policy is that the claim must be reported during the policy period. Because of long-tail exposure, an insured may legitimately not be aware of a claim or potential claim for months or years after the act or occurrence giving rise to the claim occurred. Therefore, it is vital that business and commercial insureds which have long-tail exposure maintain uninterrupted claims-made liability coverage.
Now is the time to contact Richey-Barrett Insurance, your Trusted Choice Independent Insurance Agent, for your business and commercial insurance needs.
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