CLAIMS-MADE POLICIES - EXERCISE CAUTION WHEN REPORTING CIRCUMSTANCES THAT COULD GIVE RISE TO A CLAIM

This article assumes that the Claims-Made policy permits such reporting; and, preserves coverage for future post-expiration CLAIMS brought against the Insured arising out of CIRCUMSTANCES that were reported during the active policy period.  Yes, indeed, there remain in the market some Claims-Made policy offerings that have restrictive Circumstance Reporting provisions.

For additional details see our earlier article entitled Closely Examine Terms and Conditions of Site Pollution Policies for “Trap Doors”. 

 First, one has to discern if the particular Matter of Concern is a CIRCUMSTANCE - more often than not such determination is not particularly complicated. The best way to do this is to work your way backwards.  For example, your Professional Service firm receives a subpoena duces tecum, a court order to produce certain particular documents; and the Insured(s) do not have any knowledge as to the reason why they’ve been ordered to provide such documents - more specifically, the Insured is not aware of a Wrongful Act relative to such court order that could give rise to a Claim.  With that fact pattern, such Matter of Concern likely is something that should not be reported as a CIRCUMSTANCE.  In some cases, such determination is not clear; or an inexperienced insured or broker may not realize the negative implications of reporting to its carrier a Matter of Concern that has not yet evolved into a CIRCUMSTANCE as defined by the policy.  While policy language may vary, it is essential that the Insured review the policy’s CIRCUMSTANCE Reporting provisions carefully and seek guidance from their insurance broker and legal counsel as appropriate.  

 While Circumstance Reporting Provisions can vary from policy to policy; and from carrier to carrier, what an Insured must make every effort to avoid is the premature reporting of a Matter of Concern that is rejected by the carrier.  This can cause complications in the event that such coverage has to be replaced from Rejecting Carrier to New Carrier.  New Carrier’s application may require information pertaining to the Matter of Concern since it was “reported” to a prior carrier; and/or its policy may have provisions that could potentially restrict coverage in the event that a Claim related to a Rejected Circumstance is made against the Insured during New Carrier’s policy period.

 We will shortly provide additional commentary here on our website to further elaborate on issues of importance relating to Circumstance Reporting.  

 A Rule of Thumb:  Don’t replace Claims-Made Coverage unless there are compelling reasons.

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