Here at ALPS, all of us who work in claims and risk management periodically take calls from lawyers unsure if they need to report a claim. While we view reaching out for assistance in working through this important decision as a good thing, we also recognize that some lawyers will choose not to if for no other reason than they are afraid that doing so might have negative repercussions. If you ever find yourself facing a situation of concern, and are hesitant to reach out to your insurer, you may find this short checklist useful. Hopefully, it will help you decide for yourself if a report needs to be made.
- What to report: All claims, regardless of the merits of the allegations. A claim is often defined as any demand for money or services to include but not limited to demand letters, being served with a lawsuit, or the institution of an alternative dispute resolution process. And all potential claims. Think about any actual or alleged wrongful act, which is typically defined as any error, act or omission in professional services that you know or reasonably should know could be the basis of a claim or suit covered under your policy.
- When to report: Malpractice policies, which are claims-made and reported policies, generally require timely, if not immediate, notice of all claims and potential claims, and again, regardless of the merits of the allegations. Unlike occurrence-based policies, notice is what triggers coverage, not the underlying act, error or omission that is the basis of the claim. If you are aware of an actual or potential claim, the time to report has arrived.
- How to report: Many policies require that notice be in writing. Regardless, notice is intended to let the insurer know the basics of what the issues are. Briefly detail the specific misstep that occurred or is being alleged, identify the client, and provide the relevant date. Notice can be as short as a paragraph, depending on what the error or the potential error was.
- Why report: Failing to timely report a claim in accordance with the contractual obligations set forth in your malpractice policy is similar to trying to hide awareness of a claim while applying for coverage or reapplying for continuous coverage. The consequences of not doing so, which include the possible loss of coverage for the claim and/or rescission of your policy, can be severe.
- Remember that you have a contractual obligation to cooperate with your insurer: While the specific language of cooperation clauses will differ between insurers; all provide that you must cooperate with them in the defense of the claim or suit. Of particular importance is this. You don’t want to make any payments, admit any liability, settle a claim, assume any obligation, or incur any expense absent your insurer’s prior consent. Stated another way, trying to resolve a claim on your own before finally deciding to report it is a bad idea.