Property and Casualty Insurance · Casualty Insurance · 6 min read
Reporting Incidents and Supporting Claims
- Identify the post-loss duties an insured or person seeking coverage must fulfill after an occurrence, incident, or property damage.
- Explain the rules governing notice, legal papers, cooperation, voluntary payments, and examinations under standard ISO liability and auto forms.
- Describe the insurer's rights regarding settlement, the duty to defend under reservation of rights, and the preservation of subrogation rights.
Post-Loss Duties and Notice Requirements
A liability policy condition specifies the duties an insured must fulfill after an occurrence, incident, or loss. Under standard Insurance Services Office (ISO) forms, these duties after a loss may apply to the named insured, other insureds, or other people seeking coverage, depending on the duty and policy. Post-loss duties are policy conditions, but whether a breach relieves the insurer of a coverage or payment obligation depends on the policy and applicable state law. Failing to comply with post-loss duties may give the insurer grounds to deny coverage, though whether the insurer must show prejudice depends on applicable state law and the policy.
When an incident occurs, you must notify the insurer or its authorized representative as soon as practicable, using the method the policy requires. Notice of an occurrence must be given as soon as reasonably practical under the circumstances. To the extent possible, notice of an occurrence should include when and where it happened, what occurred, and the names and addresses of any injured persons and witnesses.
For example, if a customer slips on a wet floor in a retail shop, the store owner should immediately gather witness contact details and notify the insurer or agent. Prompt reporting ensures the insurer can begin an investigation while evidence and memories are fresh. Whether an insurer must show prejudice before denying coverage for late notice depends on applicable state law and the policy.
Common mistakes
- Believing that an insured must always obtain the insurer's prior approval before paying for emergency first aid to an injured person at the scene of an accident.
- Assuming that an insured can settle third-party auto or general liability claims independently and force the insurer to reimburse the cost.
- Assuming standard commercial general liability policies require the insured's consent to settle claims, confusing them with professional liability forms that contain hammer clauses.
- Signing a release of liability with a negligent third party after an accident without realizing it impairs the insurer's subrogation rights and may jeopardize coverage.
Key points
- Post-loss duties are policy conditions, and failure to comply may give the insurer grounds to deny coverage, subject to policy language and state law requirements regarding prejudice.
- Notice of an occurrence must be given as soon as reasonably practical, including key details such as time, place, circumstances, and witness information.
- The insured must forward legal papers within the time required by the policy and cooperate with the insurer in the investigation and defense; prompt forwarding helps avoid a default judgment.
- Under the standard ISO CGL form, an insured may make a voluntary payment, assume an obligation, or incur an expense without the insurer's consent at the insured's own cost; the form also makes an exception for first aid to others at the time of an accident.
- Standard ISO CGL and Personal Auto Policy liability coverage generally lets the insurer settle covered third-party claims without the insured's consent, subject to policy terms and its duty of good faith; some professional liability policies instead have consent-to-settle and hammer clauses.
- The duty to defend is broader than the duty to pay in many states, and insurers protect against waiving coverage defenses through reservation of rights letters or non-waiver agreements.
- Insureds must protect damaged vehicles from further loss, allow pre-repair inspections, notify police for thefts and hit-and-run claims, and protect the insurer's subrogation rights.
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