During the normal course of business, mistakes happen. Most of the time, these mistakes don’t lead to an E&O claim. However, you never know. Often the simplest mistakes can lead to big claims. Insureds often ask us if they should report a claim. We always respond the same. “if you thought enough about it to call me, then you should report it” or ‘when in doubt, report it”. Failure to report a matter or issue that may result in a claim can lead to a denial of a claim, whereas reporting the incident does little harm. We have clients that report 3 or 4 matters each year and have never had a reported claim.
Reporting an E&O claim correctly and timely is a key factor in determining coverage under an errors and omissions insurance policy. E&O policies have very specific requirements as to when and how to report claims. Failure to report claims in a timely fashion unfortunately often leads to a denial of coverage for claims that otherwise would have been covered. It is important to review your policy carefully and work with your agent or broker to decide when and how to report. A general rule of thumb is when it doubt report it.
E&O insurance polices typcially contain the following types of provisions .
1. Claims must be reported in writing to the carrier. Calling a broker is not sufficient to report a claim.
2. Claims must be reported prior to the expiration of the policy. Some policies contain an automatic extended reporting period of from 30 to 60 days to report claims, however, many do not. Knowledge of a claim prior to policy expiration that is not reported can be a reason for a denial of a claim, even if you renewed with the same carrier.
3. Incidents that could give rise to claim should be reported prior to the policy expiration date. This is important since many ‘incidents” don’t materialize into a claim until a future date. Since E&O policies are written on a claims made basis, an incident not reported during the policy period could lead to a future uncovered claim.