El Segundo, CA – What do USC, Harvard University, and Wayfarer have in common? They all had knowledge that something was awry, started internal investigations, had discussions internally, but never notified their insurance companies that there was a problem that could later give rise to a claim or lawsuit.
When renewal applications were filled out, they stated that they were unaware of any act or action that could later give rise to a claim.
When Lawsuits were filed, their insurance companies denied coverage based on prior knowledge and failure to disclose.
One could ask what kind of coverage would do that? A “Claims Made and Reported policy,” something quite common these days with a legacy that dates to the early 1970s. Claims made policies today are used for all C suite coverages such as Director and Officer liability A. K. A., employment practice liability insurance and Malpractice Policies.
Even though no one may have threatened the policyholder with a lawsuit, insiders may be aware of actions that could later give rise to a claim. These must be disclosed on any insurance application.
Since 1972, claims-made insurance policies have had a “safety net” provision in the policies whereby they can inform their then insurance company that they are aware of facts or circumstances that may later give rise to a claim. They may have to provide additional information but, once the policy expires, they will still have coverage should a claim be made against them arising from what had been disclosed.
In an industry article that was published in 2023 that reviewed 224 appellate decisions upholding Insurance Company claim denials, 35% arose from having prior knowledge of a problem but the companies never reported it which would have preserved insurance coverage. The largest group of people who had their Malpractice Claims denied were lawyers (26%), followed by Directors & Officers (22 %).
Had they read “Claims Made Insurance, The Policy that Changed the Industry,” you wouldn’t be reading this. Learn more at Amazon.com: Claims-Made Insurance – The Policy That Changed the Industry: A Deep Dive, Review, and History eBook : Fisher, Frederick: Kindle Store.
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