Whether or not a situation merits disclosure can be an important decision because, depending on the specific terms of the warranty statement or applicable insurance policy, the failure to disclose where required may very well jeopardize coverage for a claim. (Credit: Feng Yu/Adobe Stock)
When policyholders switch insurance carriers or seek to increase the limits of their management liability or professional liability insurance programs by adding additional excess insurance layers, it is routine for the new insurers to require a warranty statement in which the policyholder represents that it is not aware of any facts or circumstances that may give rise to a claim—or, alternatively, discloses any known circumstances that may give rise to a claim. The warranty statement may be contained within a broader application or may be a separate document. In some cases, whether or not to disclose certain known circumstances in connection with a warranty statement is fairly apparent. In other cases, whether or not a particular situation requires disclosure to an insurer may fall within a gray area for which consultation with counsel is recommended.
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