A common in the claim process is the late reporting of claims.
There are many reasons for missing a reporting deadline; however, in most cases, they will not matter. We have seen the courts stand behind the strict reporting requirements of the insurance policy. The policy is a binding contract between the two parties, and the provisions are usually very clear. We have yet to see a “sympathy clause” in an insurance policy.
Claim Reporting Requirements
An insurance policy is not tested until there is a claim made against it. Most policies are straightforward regarding the acts or events that are covered. Insurance policies also spell out the proper way to submit a claim to the insurer. Within the reporting requirements, you’ll often see time requirements, as well as a list of the information that must be included, that establish sufficient notice of claim or loss.
A common coverage objection from insurers is the late or insufficient reporting of claims. In the case of claims made and reported policies, the insured may be required to give notice of all claims, either within the policy period or a post-policy grace period of 60 to 90 days. A continuous renewal with the same insurer does not remove that reporting requirement. Every renewal is another chance to miss a claim reporting deadline.
The reporting guidelines may also require the insured to identify the act that happened, the date it happened, who might sue the insured, what parties have been injured and the magnitude of the injury. If there is a demand for damages or a lawsuit, that’s usually sufficient information to constitute a claim.
What Can Cause a Claim to be Reported Late?
- The insured did not understand that a circumstance was a reportable claim and let it go beyond the deadline.
- The notice was sent to the wrong insurer, wrong layer or wrong line of coverage.
- The claim was sent to the broker and did not make it to the insurer in time.
- A claim lands on the desk of the person at the insured’s company who is responsible for reporting claims but they are out of the office for an extended period, or the paperwork gets lost or buried.
When a claim is denied as a result of late reporting, some common complaints are:
- “Our late reporting didn’t prejudice the claim, so the insurer should pay.”
- “The first event that evolved into this claim wasn’t substantial enough to be called a claim under the policy, in our opinion.”
- “We didn’t want to report every potential claim because our premiums would go up.”
- “The broker received the claim in time, but it was late to the insurer.”
- “I’ve had my insurance with this insurer for seven consecutive years. How can they deny coverage to a loyal customer?”
The following recommendations can help reduce the possibility of late notice denials:
- Report claims and circumstances directly to the insurer as instructed in the policy you purchased.
- Send the direct notice of loss to the insurer and your agent, so your agent can assist.
- Use claims hotlines included with the policy. This allows you to talk to the insurer or claims attorney before deciding to notice or not notice.
- When in doubt, report the circumstance to the insurer. If the insurer doesn’t accept it, at least there is a record of the attempt, making it more difficult to deny the claim if it develops later.