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From Gerry's Desk - New Ruling in Pennsylvania Impacts the Implications of the Late Reporting of Claims to Claims Made Policies
A recent Pennsylvania ruling, ACE American Ins. Co. V. Underwriters & Lloyds, significantly
impacts the negative implications of a late report of a claim to a
claims-made insurance policy such as Directors & Officers
Liability,  Employment Practices Liability & Professional Errors
& Omission Liability policies.
Previously,
Pennsylvania courts have upheld that an insurance company was relieved
of its obligations to pay claims or defend an insured only if
the insurance company could show prejudice by the failure of the
Insured to comply with the claim notice provisions in a policy.
In other words, if a claim was reported late, the insurance company was
forced to prove that it had to pay more than it otherwise would have if
they had received appropriate notice. If they insurance company
could not prove that they were prejudiced by the late report, the
insurance company was required to cover the claim regardless of the
late report.
The troubling part
of this new case law is that the court concluded that an insurer does
not need to show any prejudice to be relieved of its obligations to pay
claims (or defense costs). Basically, in a claims-made policy, if a
claim is reported late, the carrier can deny coverage without having to
prove anything.
Fortunately, occurrence based policies are not impacted by this ruling.
At KMRD Partners, we have always
maintained that all claims be reported as soon as our clients become
aware of the situation. This is simply a good risk management practice. Due to the
recent ruling, we feel it is more important than ever to keep your
carrier and risk management professional aware of any circumstance that
may give rise to a claim. We realize that this may be a challenge since
there is a fine line between a complaint and a demand, but an open
communication process is essential to determine the difference.
Click here for a copy of the ruling: ACE American Ins. Co. V. Underwriters & Lloyds
If you have any questions or concerns about your particular circumstance feel free to contact us at contactus@kmrdpartners.com.
Sincerely,
 
Gerry Sorge, Claims Advocate
KMRD Partners, Inc.
About KMRD Partners, Inc.
- KMRD Partners, Inc. is a full service Property & Casualty broker
serving the commercial property and casualty insurance market from
offices in the Philadelphia, PA region. Their mission statement, “Making a difference by Managing the Cost of Risk”,
is a unique approach that focuses not just on insurance placement, but
coverage expertise, service accountability, client education and risk
management.
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