In The Know: The Lowenstein Insurance Recovery Group’s Tip Of The Month - May 2021

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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.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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