Don’t make the mistake that Harvard did. It cost them $15 million in insurance coverage.
In light of this decision, there are several practical steps a policyholder can take.
First, when a claim is received, the policyholders should review the notice provisions in its insurance policies. When in doubt on what to do, policyholders should notice the entire tower (or towers) of coverage of the claim. The notice language in umbrella and excess policies doesn’t necessarily follow the notice language in the underlying policies. The notice language in the umbrella and excess policies may require notice as soon as the policyholder is aware of an occurrence, not just when the claim is likely to involve the umbrella or excess policy.
Second, make sure that the notice provisions in the insurance policy are followed. The insurance policy will contain language on where, when, and how notice is to be provided. Follow the instructions in the insurance policy. In addition, when notice is sent to the insurance carriers (especially with a long-tail claim), draft the notice letter to include any and all known and unknown insurance policies issued by the insurance carrier. While many insurance carriers are now requiring notice of a new claim via email, policyholders should also send the notice letter by certified mail return receipt requested. That way, the policyholder has the USPS green card signed by the insurance company evidencing that notice was received by the insurance carrier if the insurance carrier later claims it did not receive notice.
Third, policyholders should work with their insurance broker to negotiate endorsements onto their insurance policies which protect the policyholder when noticing a claim. For instance, there is an endorsement that prevents an insurance company from denying a claim if it has not been prejudiced. The same endorsement protects the policyholder by limiting who within the company must give notice when there is knowledge of a claim. That endorsement provides:
“You must see to it that we are notified as soon as practicable of an “occurrence”, offense, claim or “suit” after the Risk Manager or Risk Management Department or his/her designee becomes aware of such “occurrence”,offense, claim or “suit”. The failure in good faith to recognize that such “occurrence”, offense, claim or “suit” may involve this insurance shall not operate to prejudice your rights under this policy. To the extent possible, notice should include:
- How, when and where the "occurrence" or offense took place;
- The names and addresses of any injured persons and witnesses: and
- The nature and locations of any injury or damage arising out of the "occurrence" or offense.
Bottom line - don’t make the mistake that Harvard did. It cost them $15 million in insurance coverage.