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A Policyholder’s Obligation to Notice Insurance Carriers of a Claim

3/25/2018

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When a loss occurs, the policyholder must give notice of the claim under all of its potentially applicable insurance  policies as soon as practicable.   ​

A claim may trigger more than one policy and it is important to place all potentially  applicable insurance policies on notice.  Not only should the primary policies be placed on notice, but the umbrella and  excess policies should be placed on notice as well.  A policyholder should review the policies as they typically identify to  whom notice must be given.  Notice letters, with documentation of the claim (a complaint, letter, etc.), should be sent  by certified mail, return receipt requested, so that the policyholder has documented evidence that the insurance carrier  received the notice letter. 

​If a policyholder fails to give timely notice of a claim, serious coverage issues can arise.  For  instance, insurance carriers can assert late notice as a coverage defense to deny coverage. 
 
​Upon receipt of a claim, the insurance carrier can:  (1) accept the claim and provide coverage; (2) reserve coverage  rights; or (3) deny coverage.  When the policyholder receives a reservation of rights letter or denial of coverage letter  from the insurance company, it should not file the letter away.  Instead, the policyholder should respond to the  reservation of rights letter or denial of coverage letter and make a record that it objects to the denial or reservation of  rights and assert that it continues to preserve all rights to coverage for the claim. Many times the insurance company’s  analysis is flawed and it is up to the policyholder to try and persuade the insurance carrier to reconsider its coverage  position.

There are a number of coverage issues surrounding notice letters and the insurance company’s response to  same.  It is important for companies to pay serious attention to the noticing process.  SandRun Risk can help companies  with that process and ensure that they get the coverage that they paid for.

1 Comment
Elise D link
4/27/2021 03:43:21 am

I enjoyed readding this

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    Authors

    Lori Siwik and Mark Siwik are the founders of SandRun Risk.  They apply the principles of vertical leadership and lean six sigma to the discipline of risk management.  From time to time they share their blog with guest authors who write about important risk management principles.

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