There are two distinct "Claims Made" policy forms and the difference can determine the outcome of a potential claim. The two types are: "Claims Made" and "Claims Made and Reported". Both forms contain the Wording "Claims Made". This will be the written demand for money or services being made. The reporting requirements are generally spelled out within each policy and may be proprietary to that insurer. Since most professional liability policies are 'claims made', and will generally state on the declarations page, that this is a "Claims Made" form, it is extremely important to understand the claims reporting provisions contained within that particular policy.
The "pure Claims Made" form requires that the 'claim' must occur and be made during the policy term and be reported as soon as practicable, or promptly (and not necessarily during the policy term). (note the importance here of the Word 'made' during the policy term). The "Claims Made and Reported" form has the requirement that the claim must BOTH occur during the policy term and be reported during the same policy term. A single day can mean coverage or no coverage. The professional liability insurance purchaser must make certain these two policy forms are understood. A recent Montana case made this point very clear when coverage was denied. (Gotham Ins. Co. v Allegiance Benefit Management, US Dist. Court, Dist. Of Mt. Missoula Div. case 9:11- cv-00039-DWM-8/2012).
Both policies will also stipulate claims reporting instructions. Seldom is the case where an insured and insurer dispute the proper address to which notice of a claim should be sent. However, this is exactly what occurred in the 3rd Circuit Court of Appeals, Atlantic Health System v National Union Fire Ins. 2012 WL 640033 (3rd Cir. 2/29/2012). The court held that the notice of an underlying lawsuit submitted by Atlantic Health to National Union Fire was improper because it was sent to the wrong National Union address. The court stated that "strict adherence to the reporting provisions in a claims- made policy is essential and the policy clearly required written notice to a special address within a specified period of time."
The above is certainly a strong reminder that when it comes to proper notice, insured's should be cognizant, not just about the timeliness of transmittal, but of the channel through which the claim is submitted.
Article By: Dennis Gambill - The author is an Insurance Litigation consultant. Adjunct professor at EMC for 8 years-Risk & Insurance. 40+ years-both MGA and agency experience.
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