Reporting An Insurance Claim

Many of us have wondered at one time or another whether we should report a loss to our insurance company. From the slightest fender-bender accident on our property to a customer’s slip and fall, we often hope our insurer won’t find out or the loss will go away on its own. However, it is important to promptly report all events that may give rise to claims to save yourself time, stress and money.

Be Timely

Virtually all insurance policies specify when losses must be reported to insurers. Actually, you’re supposed to report any event that may give rise to a claim. One policy may require notice be given “as soon as practicable” after a loss occurs. Another may require the insured to give “prompt notice” of a loss. The words used often vary, but the intent is usually the same: If you want your insurer to pay for the loss, you have to report it promptly.

So what is prompt notice? Courts have interpreted the phrase differently. Some policies set specific time limits. It’s best to check your own policy to determine what you have already promised to do. Generally, notice needs to be given as soon as practicable.

Occasionally, insurers have to decline coverage for a loss because of late notice. Insurance companies have a contractual and statutory duty to investigate losses promptly and pay claims fairly when liability for a loss becomes reasonably clear. Often, when losses are reported late, evidence has disappeared.

If insurers can’t tell what they owe or determine who is liable, they may have to decline coverage; and courts have allowed them to do so. It’s impossible to list all the circumstances that may cause an insurer to decline coverage or prejudice it against late notice of a claim; suffice it to say, receiving a coverage denial from your insurer is no fun.

At the heart of the requirement for prompt reporting of losses is the relationship of trust that must exist between insureds and insurers. Insurance policies are two-party contracts with promises made on both sides in exchange for coverage and a premium payment. Most agreements we make are good-faith contracts. However, insurance policies are contracts of utmost good faith, which is a higher standard.

Of course, don’t even think about settling a claim made against you before reporting it to your insurer. Your attempt could waive all kinds of coverage and liability defenses. For example, perhaps you do not actually owe the claim, but other customers hear about the settlement and expect similar treatment. Once your insurer learns about it, after the fact, it may be inclined to cancel your coverage since you have violated your policy conditions, which allow it to handle claims that arise under your policy.

The long and short of it is: If a loss occurs that might be covered under your policy, report the claim without delay. What’s the worst that can happen when you don’t report a loss promptly? You may have to pay for the loss and the resulting expenses yourself. If it’s a loss that can’t be resolved outside the courthouse, the resolution could be extra expensive.

Finally, why go through the grief of dealing with difficult customers who suffered a loss if you don’t have to?