Make Sure You’re Covered: Report All Claims and Potential Claims

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Authored by attorney Ashley Moss

Professional liability insurance carriers require their insureds to report claims timely as a condition to coverage.  This is especially important at the time for renewal of insurance coverage, when the carrier will ask about knowledge of any claims or potential claims.  Professionals typically fear that notifying the insurer of a potential claim will result in higher premiums or even rejection of an application for coverage.  Contrary to popular belief, reporting potential claims rarely affects insurance premiums or availability.  However, failure to report timely and accurately can be very costly if the insurer later denies coverage.

So, what is a “potential” claim that must be reported?  It seems obvious that you need not call your broker or insurer every time a client makes even the slightest complaint, but ignoring a problem until your client files a lawsuit may result in no coverage.  While every situation is unique, here are some general principles to keep in mind when deciding what to report and when to report a potential claim:

–  Act quickly.  If your client has retained or is threatening to retain an attorney, notify your insurance carrier or broker.

– Report all claims, even if you think they are unjustified or can be resolved on your own.  Defending yourself in a lawsuit is costly, even if your position is correct.

– Pay attention when the client complains about increased costs and budget issues – especially if the costs are related to one of your errors.

– If the client asks you to pay for something or says it is withholding your fee to offset its expense, your carrier should know.

– Read your insurance policy to see how it defines “claims” and “potential claims.”  If your situation falls within one of these definitions, notify your carrier.

– If a complaint is made to an outside party, especially a licensing board or government entity, tell your carrier.

-When you feel the need to call an attorney about an issue, notify your carrier.

Insurance provides valuable peace of mind – make sure that you are covered when you need it.

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