Why it is Dangerous to Change Claims-Made Carriers

  • There may be claims made against the insured but not yet reported to the current carrier
  • There may be pending claims the Insured is not aware of yet
  • There may be “potential claims” which Insureds report to the current carrier; however, the form may not allow reporting of potential claims or there may not be enough details in the report. Often there is not enough time to confirm whether the report was accepted. If recognized, only the exact potential claim identified might be covered, if the claim is.made slightly differently or is related it won’t be covered.
  • There may be “potential claims” which Insureds don’t report to the current   If  the  new carrier feels the Insured should have reported the situation to the previous carrier as a “potential claim” they will decline coverage. This happens often as there are 3 different opinions as to what constitutes a “potential claim” or a “situation likely to give rise to a claim”: 1) the Insured’s opinion, 2) the old carrier’s and 3) the new carrier’s.
  • There were actual Claims reported to the current carrier. The new carrier will look to exclude any new claims that arise from or relate in any way to claims made against the prior carrier. Examples include an old claimant bringing new allegations, or a new claimant makes similar allegations arising from the same
  • Mainform applications contain claim warranty questions. ”Yes” responses may result in specific exclusions or may trigger exclusions in the form, applicable to  the reported claim and also to related claims.  “No” responses may trigger a voided policy or denial of coverage if the carrier tracks the history of a claim and determines that IN THEIR OPINION the Insured should have answered “yes”.
  • Differences between the policy forms – different definitions of “claim” or “wrongful act” –  different reporting guidelines, etc.- may impact whether the carriers deem an incident should have been reported, and when. The new carrier may say something should have been reported to the old carrier as a Claim even though the old carrier might not have accepted it as a
  • What constitutes a “situation that may give rise to a claim”, or “circumstances which any Insured should reasonably expect to give rise to a claim” may be described differently between carriers or be silent in either
  • Definitions of “interrelated claims”. The old carrier may not state that future claims related to claims already reported will be covered. The new carrier may deny new claims deemed “related” to past
  • The new carrier may contain a retroactive date or prior acts exclusion, either be displayed on the Declarations page, written into the policy form or mentioned on an endorsement.   A specific date may be used or  there may be a reference to the “inception date of coverage” or “the first date of continuous coverage”.
  • Prior/pending litigation exclusions or  continuity  dates  may  be  displayed  on  the  Declarations  page,  written into  the policy  form or  mentioned  in endorsements.  A specific  date may be used  or  there  may be a reference  to the “inception  date of coverage” or  “the first date of continuous  coverage”.  Prior/Pending  Litigation exclusions exclude claims arising or related to the pending or prior litigation not just the pending or prior litigation itself
  • Prior knowledge exclusions in most forms apply to claims, acts or even situations which the Insured knew about as of the inception date. Prior notice exclusions for claims, acts or situations which the Insured did or should have reported to the previous carrier, including related claims or situations, whether covered or not by previous carriers
  • Not least importantly, the adjusting of Management & Professional Liability claims is often highly subjective, with weight given to loyalty of the insured and relationship with the broker. We’ve seen claims covered due to relationship that could have been declined due to a reporting

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