This article emphasizes the importance of timely reporting in environmental and construction professional insurance policies. The policies require the insured party to provide notice of a claim or coverage trigger “as soon as practicable.” Late reporting can cause issues for both the insured and the carrier, including altered site conditions, lost evidence, and difficulty in preparing a defense. The article lists assumptions or circumstances that may lead to delayed reporting, such as assuming costs will fall within the deductible or self-insured retention or fear of adverse effects on future premiums.
An environmental or construction professional insurance policy purchased through Distinguished requires an insured to provide notice of a claim, first-party discovery issues, or when coverage is otherwise requested or triggered under these policies (applicability of these varies by policy type) (hereinafter collectively “claim”) in each case, “as soon as practicable.” Claims involving ancillary coverages for emergency expenses and business interruption may have unique reporting requirements. Notification requirements under our Follow-Form Excess Policy will follow the notification requirements of the underlying policy.
Most of our policies also provide a notification of possible claim provision as an enhancement. During the policy period, if the insured first becomes aware of a circumstance and reports that circumstance under the Notice of Possible Claim terms and conditions of the policy, that notification may preserve coverage under the policy term in effect should that circumstance later develop into a claim after the policy term has expired.
Potential Untimely Reporting Concerns
An insured’s late reporting of a claim could put our Claims Team in a precarious position. We do our best work for our insureds when a claim is reported to us in a timely manner. The sooner we are advised of the claim, the sooner our Claims Team can respond. Delayed reporting only causes issues for the insured and the carrier alike.
Delayed reporting may result in altered site conditions, lost evidence, unlocatable witnesses or faded memories, an inability to mitigate loss and damages, hinder the ability to properly prepare a defense or potentially reach a favorable early resolution, and prejudice the carrier. The potential loss of reputation, time, and money when an insured attempts to deal with a claim before reporting it to us may also be minimized.
Insureds may fail to timely provide claim notification based on various assumptions or circumstances, including that:
- The costs will fall within the policy’s self-insured retention or deductible.
- They can resolve the claim on their own.
- The policy will not cover the claim.
- Future premiums may be adversely affected by reporting claims.
- The employees involved do not report the incident internally or appropriately.
By the time such a claim is reported to the carrier, it may be too late to satisfy the policy’s reporting requirements, and coverage may be denied. Note, too, most insurance policies do not cover costs, including legal expenses, which are incurred prior to reporting or without proper authorization from the claims handler. We do not relish denying a claim because the insured failed to timely report it or secure proper authorization.
Our Claims Team has experienced defense counsel and other vendors at their disposal across the country to efficiently assist in the handling of claims on an insured’s behalf. Handling claims promptly may also result in lower overall costs and help to preserve an insured’s limits of liability.
What Can You Do?
All insureds should have procedures for reporting problematic incidents, projects, and claims as a risk management practice and provide training to employees on those procedures. Help your insureds institute protocols to monitor and measure compliance with these procedures. Insureds should develop protocols for designating an employee or group for incident notification and create a hotline number for ease of notification.
Treat all notifications, demands, and litigation filings as a hot potato. Have a procedure in place for reporting those to the broker and carrier within a short window.
Remember that insurance should be a partnership. If you are ever in doubt, report a circumstance or claim as soon as you are aware of it.
Get A Quote For Distinguished’s Environmental And Construction Professional Insurance
At Distinguished, our Environmental and Construction Professional Insurance products stand out as an industry leader backed by experts with years of experience in this field. If you want you and your clients in good hands, register your brokerage today, and we can start getting you a custom quote that fits your client’s needs.
To learn more about our specific policies, you can also explore some of our product pages below:
- Environmental and Construction Professional Insurance Overview
- Contractor’s Pollution Legal Liability Plus
- Contractor’s Pollution and Professional Legal Liability Plus
- Owner’s Professional Protective Indemnity Plus
- Pollution Legal Liability Plus
- Follow Form Excess Liability
About the Author: Cathy Cleary, JD, CPCU, RPLU, is a Senior Vice President with the Environmental and Construction Professional Division at Distinguished Programs. Ms. Cleary has over 27 years of combined experience in underwriting, claims and legal servicing in support of environmental and construction insureds.
The opinions expressed in this article are solely those of the author. Only the applicable policy contains a complete description of all the provisions of the coverage.