When reporting liability insurance claims, companies must exercise caution. The governing rules may differ based on whether a policy falls under the “claims made and reported” category or the “occurrence” category. This dichotomy primarily affects Directors and Officers and Errors and Omissions policies, which are typically written on a claims made and reported basis.
As detailed in an article by Ervin Cohen & Jessup LLP, the variance in reporting requirements can be quite profound. Each class of policy has its distinct set of guidelines that must be strictly adhered to. Failure to comply can lead to dramatic repercussions, such as the denial of coverage.
Those governed by occurrence-based coverage are enacted when a covered event occurs during the policy period, irrespective of when the claim is reported. On the other hand, claims made and reported policies activate when a claim is both made and reported during the policy period.
It is crucial for corporations to be well-versed in the specific rules governing their type of policy, a lack of understanding can lead to devastating financial impacts. To avoid finding yourself in such a predicament, it is essential to seek guidance from legal professionals well versed in such matters. With the ever-evolving landscape of global corporate law, staying ahead of these reporting requirements is of paramount importance.
The JDSupra article recommends that directors and officers within corporations review their respective policies’ language to ensure both understanding and compliance. Recording and reporting claims in an organized and timely manner has a significant role to play in leveraging and maximizing your policy coverage benefits.