Insurance Law Hawaii: Claims-Made Policies

February 11, 2010

Claims-Made Policies - Avoiding Minefields

An informative teleconference on Claims-Made policies was recently hosted by Strafford. Here are some take-away points.

Most claims-made policies require the insured to report an event that will likely give rise to a claim in the future. If the reported event eventually evolves into a claim, the insurer will treat the claim as if it were first made during the policy period when the initial report was made.
Ideally, the policy includes a "claims-made-and-reported form" allowing the insured an additional period of time after the policy period expires to report a claim first made during the policy period.
An Incident Reporting Provision is different from a claim-reporting extension. An "incident" must typically be reported in sufficient detail prior to the expiration of the policy. Therefore, "claim" and "incident" are not synonymous.
Although a claims-made policy may have an extended reporting period after the policy period, insurers may deny such benefits to a renewing policy holder who first reports a claim from a prior policy period when it is first reported during a renewed policy period.
Many claims-made policies require "Notice of Circumstances" as follows: "If during the Policy Period an Insured shall become aware of any circumstances which may reasonably be expected to give rise to a Claim being made against an Insured and shall give notice to the Insurer of the circumstances, then a Claim which is subsequently made against such Insured and reported to the Insurer shall be considered made at the time such notice of such circumstances was given."
A "Notice of Circumstances" to the insurer should include: (1) the nature of the transaction or circumstance; (2) the names of the claimants; (3) the laws or regulations forming basis for alleged liability.
The insured should take full advantage of a "Notice of Circumstances" provision to eliminate any doubt regarding requirements for giving notice of a claim. Compliance with such a provision avoids risk of late notice. Further, giving notice of circumstances avoids a potential misrepresentation in the renewal application.
Some claims-made policies have self-insured retention requirements. Unless the policy specifies otherwise, all notice requirements apply to claims within the applicable retention period. Defense-handling procedures within the retention may vary widely depending on the policy.

Thanks to the three panel members who led the teleconference: Frederick J. Fisher, E.L.M. Insurance Brokers, El Sugundo, Calif.; Anthony Bartell, McCarter & English, Newark, N.J.; and David S. White, Thompson & Knight, Dallas, Tx.

Posted by Tred Eyerly on February 11, 2010 in Claims Made Policies | Permalink

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An informative teleconference on Claims-Made policies was recently hosted by Strafford. Here are some take-away points.

Most claims-made policies require the insured to report an event that will likely give rise to a claim in the future. If the reported event eventually evolves into a claim, the insurer will treat the claim as if it were first made during the policy period when the initial report was made.
Ideally, the policy includes a "claims-made-and-reported form" allowing the insured an additional period of time after the policy period expires to report a claim first made during the policy period.
An Incident Reporting Provision is different from a claim-reporting extension. An "incident" must typically be reported in sufficient detail prior to the expiration of the policy. Therefore, "claim" and "incident" are not synonymous.
Although a claims-made policy may have an extended reporting period after the policy period, insurers may deny such benefits to a renewing policy holder who first reports a claim from a prior policy period when it is first reported during a renewed policy period.
Many claims-made policies require "Notice of Circumstances" as follows: "If during the Policy Period an Insured shall become aware of any circumstances which may reasonably be expected to give rise to a Claim being made against an Insured and shall give notice to the Insurer of the circumstances, then a Claim which is subsequently made against such Insured and reported to the Insurer shall be considered made at the time such notice of such circumstances was given."
A "Notice of Circumstances" to the insurer should include: (1) the nature of the transaction or circumstance; (2) the names of the claimants; (3) the laws or regulations forming basis for alleged liability.
The insured should take full advantage of a "Notice of Circumstances" provision to eliminate any doubt regarding requirements for giving notice of a claim. Compliance with such a provision avoids risk of late notice. Further, giving notice of circumstances avoids a potential misrepresentation in the renewal application.
Some claims-made policies have self-insured retention requirements. Unless the policy specifies otherwise, all notice requirements apply to claims within the applicable retention period. Defense-handling procedures within the retention may vary widely depending on the policy.