Insurance Claims, Cover and Late Notice… You or your business should have liability insurance, whether it is Motor, Public Liability or Employer’s Liability insurance. This insurance protection indemnifies an insured in respect of liability to third persons. But what happens if a claim is made against you?
Insurance Policies are contracts between the insurer and the insured and their terms can vary widely, so the starting point in deciding whether you are entitled to indemnity for any potential third-party liability claim is found in the policy terms.
If there is a proven claim, the insurer will be liable to pay unless they can raise a valid defence. So, when an insurer is notified of a potential claim, the first step they take is to ensure that the insured was actually covered, or indemnified, for the risk which has arisen, as this may not be the case.
An insurer will look at:
- the existence of an insurance policy
- the period of cover
- the cause of the loss
- whether the loss is covered or excluded under the policy.
- whether the insured failed to disclose material facts when the insurance contract was entered into.
It may be the case that the policy expired hours before the incident took place, or the policy does not cover an insurer for that specific risk, in which case, an insurer may be able to avoid the claim under the policy and refuse cover.
Notification of a Potential Claim
When it comes to insurance claims, one of the major provisions of an insurance policy is the need to notify your insurers as soon as possible of a potential or actual claim but some people fail to do this, hoping that they can deal with the matter themselves or that it will go away. This is a mistake – a failure to notify your insurer could lead to their refusing to indemnify you due to late notification.
Notice must be given to the insurer within the time specified in the insurance contract. Most tend to require the insured to notify the insurer “immediately” or “as soon as possible” of any event which might result in a claim.
Avoiding the Policy
So, when can an insurer avoid paying a claim due to late notification?
- The duty to notify your insurer of a potential claim is a term of the contract of insurance. If this term is breached, the insurer’s rights to avoid paying the claim will depend upon the wording of the term itself.
- Regardless of the use or absence of any descriptive words if the term requiring notification is classed as a “condition precedent” (ie: an event which must take place before a party to a contract must perform their part), then late notification automatically entitles the insurer to refuse payment.
- If just a simple warranty or an innominate term, the insurer may not be able to avoid the claim.
Policies have varying conditions as to their reporting requirements and so, the precise conditions of each individual policy need to be considered carefully, as their interpretation is essential when assessing an insured’s duty to the insurer and whether they can refuse indemnity. Even slightly different wording can have a fundamentally different effect.
A breach of a condition by the insured gives the insurer a potential right to refuse indemnity or even to void the policy from its start.
Impact of late notification
As seen above, Insurers may seize upon late notification of a claim on the basis that there has been a breach of the insurance contract.
If indemnity is withdrawn, the insurer may not cover the loss being claimed or the legal costs associated with it. The Courts have tended to take a strict view of non-compliance as being sufficient grounds for an insurer to deny liability for the claim in its entirety, even where there has been no prejudice resulting from the late notification.
Ensuring you are Indemnified
Assuming your policy covers you for the claim, you must satisfy the contractual provisions under the terms of your insurance policy to ensure that your insurer indemnifies you, including the need to notify the insurer of any relevant claim made against you under the policy.
Do I need Legal Advice?
If, for whatever reason, your insurer has refused indemnity, you will need to protect your position by dealing with the claim against you.
Legal advice can assist by:
- Advising as to whether you have cover under the policy or not.
- If your insurer has refused indemnity, advising on their grounds and whether they are entitled to do so based on the policy terms and conditions.
- Identifying and advising on any time limits or deadlines under your policy
- If proceedings have been issued in Court, advising on any time limits or deadlines, which you must comply with and the consequences of not doing so. Leaving matters and not taking any action may well jeopardise your prospects of defending the claim or raising arguments to reduce any damages or legal costs which you may be ordered to pay later on.
- Protecting your interests when exposed to significant financial and reputational risks.
At SO Legal, whilst experienced in defending insured claims, we also act for clients who find themselves “uninsured” for the purposes of a claim.
As a first step, we will review the insurance policy to assess whether the insurer has sufficient grounds to avoid the policy and withdraw indemnity. If so, we will then advise you as to the most pragmatic and commercial approach to take to limit your exposure to lengthy and expensive litigation and the associated legal costs on both sides.
In some cases, there maybe an arguable defence making the claim worth fighting, especially if it appears to be fraudulent. In others, the only approach may be one of damage limitation, where we would recommend taking a commercial view and resolving the claim as quickly as possible.
Key points to remember if you or your business are faced with an actual or even a potential claim:
- Notify your insurer as soon as possible of any event which may lead to a liability claim, preferably by phone and a follow up e-mail. This avoids any risk of late notification and loss of indemnity and enables your insurer to have sufficient time to investigate and gather evidence which it can use to defend the claim if brought in the future. If the insurer is not notified, their position may be prejudiced later on.
- Collate evidence of the claim such as photos, e-mails and documents which may assist your insurer to defend it.
- Keep full records of all documents sent to your insurers.
- Review the terms and conditions of your insurance policy to note any notification requirements, exclusions and areas which are not covered. You do not want to run the risk of your insurers withdrawing cover when you most need it.
- Ensure that all your details are correct and current, as these facts may have changed since you took out the policy.
- Make sure your renewal date is diarised to allow you time to contact your insurer or insurance broker ahead of renewal if details need updating or the extent of cover needs changing.
SO Legal Solicitors Eastbourne – 01323 407555
SO Legal Solicitors Brighton & Hove – 01273 069920
SO Legal Solicitors Notting Hill – 0203 9677700