Do it quickly

Insurance policies generally require prompt notice of a claim as a condition for coverage. If an insured reports a claim to you, don't let it get buried on your desk. Make sure you forward notice of the claim to the appropriate carrier representative within 24 hours of receiving it from the insured. Time is of the essence in every situation, but depending upon the jurisdiction and the type of policy that may respond to the claim, even a minor delay could result in denial of the claim. Notice requirements of a "claims made" policy are very different from those of an "occurrence-based" policy. Depending upon the jurisdiction, late notice of a claim may only preclude occurrence-based coverage where the carrier has been prejudiced. However, a late report under a claims-based policy will void coverage even in the absence of prejudice.

Tell everyone

Quite often an insured will report the claim to you because she isn't sure what coverage she has or even where her policy is. Should you accept the responsibility of helping her, it will be your job to figure this out.

In most cases it will be pretty easy for you to determine which insurance policy will respond to a given claim. However, it is entirely possible for an apparently simple situation to quickly turn complex. Consider this real life scenario:

In writing an agent's E&O business, the agent tells you she has just been served with a complaint seeking $3 million in damages due to her alleged failure to provide appropriate coverage for one her clients. You report the claim to her current E&O carrier, which has the coverage on a "claims made" basis. But the circumstances related to her alleged negligence all pre-date the retroactive date in the policy, so the carrier denies coverage. You apologize to the insured and tell her there's nothing more you can do.

Years pass, the litigation is ongoing and the insured is trying to defend on her own dime. Desperately seeking coverage, her attorney scrutinizes every insurance policy the insured has, and finds a provision in a $3 million umbrella policy that suggests it can be deemed "primary" coverage in situations where there is no other "available" insurance, and it does not specifically identify any policies over which it is to be considered excess. Although you think it can't be correct, you report the claim to the umbrella carrier, which denies coverage because the report is extremely late. Worse, the carrier also issues a coverage opinion stating it would have provided coverage had it been timely notified. Your agency and your E&O carrier just bought a $3 million claim.

What's the lesson? Err on the side of over-notifying any insurance policies that might respond to a claim, especially commercial package and umbrella policies, particularly if insurers on other policies deny coverage.

The claim process

After the claim is reported and the insurer accepts coverage, your duties are basically satisfied. If the carrier needs to investigate the claim to determine the availability or extent of coverage—say, in a property damage claim—be very cautious about the role you assume. You are not the insured's public adjuster and that needs to be clear to the insured. Encourage her to deal directly with the insurer in the investigation rather than use you as an intermediary. Try to avoid advocating for coverage on the insured's behalf or offering opinions with respect to coverage. This can be a delicate balance, but try to separate yourself from the carrier's coverage decisions.

The law does not generally impose a duty upon an insurance agent to assist an insured in the claim process. The instructions in the policy for reporting the claim are there for a reason. An insured very well may follow them and deal directly with the carrier without your involvement at all. But as the old adage says, "If you're going to do something, do it right." Generally speaking, this pretty much sums up the law with respect to your involvement in the claim process. Once you assume the responsibility to assist the insured in the claim process, you must fulfill the duties attendant therewith.