As you may be aware, insurance companies write into their policies a number of conditions which must be complied with in order for cover to be provided in the event of a claim.
One of these conditions is the duty on the policyholder to notify them of a circumstance which may give rise to a claim within a certain timescale or, for example, ‘as soon as reasonably practicable’. It is important to check the exact condition used in your policy, as there are a variety of wordings used by different insurance companies.
This claims briefing provides an overview of the different types of claims, and how the importance of early claims notification could affect them.
It’s important to remember that it is critical that you notify your insurance broker as soon as possible following an incident that may give rise to a claim, even if you don’t expect the claim to be made imminently.
Policy Types
Claims Made
Professional Indemnity policies are written on a ‘claims made’ basis, which means that circumstances must be notified to the insurer within the policy period that is active, regardless of when the event that gave rise to the claim occurred. If you inform your insurer about a claim after the policy has expired, but it relates to a matter or ‘circumstance’ which you knew about during the previous policy term, it is likely to be excluded.
Claims Occurring
Other policies, such as Employers Liability & Public Liability, are written on a ‘claims occurring’ basis, but crucially contain the same obligations on notification. The difference between the types of policy, is that it is the insurer on cover on the date of incident which will consider the claim under the terms of the policy in force at that time.
Case study 1
A financial advisor is asked by their customer to recommend a pension fund for a large portfolio totalling £1.2m. The fund they recommended performs poorly and the customer suffers a loss. An email is sent by the customer dated 3rd January 2023, alleging that the advisor has breached their professional duty in recommending the fund and is liable for the losses as a result.
The advisor decides not to inform his insurer because he does not believe he has done anything wrong and no legal action has been taken. The financial advisor’s Professional Indemnity policy goes through a renewal on 8th March 2023, and no details of the circumstances are provided to the insurer on the proposal form.
A solicitor’s letter is sent to the advisor on 30th March 2023, which is passed on to their insurance company.
The insurer declines policy coverage, citing a breach of the notification requirements under the policy and further states that the policy was misrepresented at renewal.
The financial advisor is left to defend the claim on his own, incurring thousands of pounds in legal costs.
Case study 2
An operative employed by a mechanical and engineering contractor suffers an injury on a site and as a result is unable to work for 2 weeks. Whilst there is no formal claim being pursued, the contractor notifies their insurance company as a precaution and carries out an investigation into the circumstances of the injury.
A year later, after the operative has left their employment, a formal claim is received. The insurance company accept policy coverage, as the notification conditions were complied with and their position had not been prejudiced because a full investigation took place at the time of the accident.
On the subject of liability claims, whether it be damage to third party property or personal injury to a member of the public or an employee, it is crucial to notify insurers of an incident early on so as not to risk a decision being made that their position has been prejudiced. Promptly informing your insurer also helps preserve important evidence related to the incident, which can be lost over time as memories fade and key witnesses may move on and be harder to locate. If an insurer decides that their ability to investigate (and potentially defend a claim) is prejudiced by the delay in notifying the incident, they could refuse to provide an indemnity.
So what do I do?
It is often difficult to gauge whether a particular circumstance is likely to turn into something on which you may later require insurer support. If an employee suffers a minor injury and is only absent for 1 working day, it may be considered unlikely that a formal claim would follow. However, if that same member of staff is heard boasting about involving a solicitor or is complaining about losing pay due to his absence, this would change the perspective entirely. If the injury or damage is more severe, then it should definitely be something you should tell your insurer about, regardless of whether a formal claim has been received, due to the higher likelihood that the claimant will pursue compensation.
A good rule of thumb is to notify any accident which is reportable to the HSE under the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations (‘RIDDOR’). This requires the HSE to be notified of specific reportable injuries to workers, absences of employees for over 7 consecutive days due to an accident at work, and injuries to members of the public if they left the scene in an ambulance and required treatment.
In respect of third party property damage, if you believe that you may need support from your insurer at any point, regardless of the size and complexity of the case, you should notify us immediately.
When it comes to making this decision, it is usually best to err on the side of caution and make your insurers aware, as the pitfalls of failing to do so could result in the insurer rejecting your claim and leaving you without coverage down the line. If in doubt, contact your dedicated claims handler or account executive who will be able to guide you through the process.
Need more information?
If you have any questions in relation to how you can make claims with us, or would like to understand more about the different kinds of claims, you can learn more from our award-winning claims team!
Read more about our claims expertise here, or get in touch if you have any further questions.
