A client seems unhappy, a deliverable missed the mark, or an error surfaces during a project review. No demand has been made and no lawsuit has been filed, but you have a sense this might become a problem. What you do next can matter a great deal under a claims-made professional liability policy.
One feature that may help is the notice of circumstances provision. Here is how it generally works.
Claims-made policies and timing
Under a claims-made policy, coverage is generally triggered when a claim is first made against you and reported to the insurer during the policy period, or an applicable extended reporting period. This is different from an occurrence policy, which looks to when the incident took place.
The structure rewards prompt reporting. A problem that develops after the policy has ended or been replaced may not be covered if it was not reported in time.
What a notice of circumstances is
A notice of circumstances is a written report to your insurer describing an incident or situation that could reasonably lead to a claim. Many policies allow you to give such notice during the policy period, and, if the policy provides for it, a later claim arising from those circumstances may be treated as made during the policy period when the notice was given.
That can be valuable if you are about to renew, change carriers, or retire, since a new policy usually excludes known circumstances.
What a good notice typically includes
Policies commonly expect details such as who is involved, the nature of the alleged error, dates, the potential damages, and how you became aware. Vague notices may not satisfy the requirement. Provide factual information and avoid speculation or admissions of fault.
Why the application matters
When you apply for new coverage, you are typically asked whether you are aware of any circumstances that might give rise to a claim. Answering inaccurately can jeopardize coverage. Reporting circumstances to the current carrier before switching can help keep the issue with the policy that was in force when it arose.
Policy conditions that can trip people up
Some policies include strict notice deadlines, require written notice, or define claims in ways that include demand letters or requests for money. Check how your policy defines a claim, and where to send notice. Waiting for a formal lawsuit can be too late.
Build a simple internal process
Make sure someone in your business knows who to call and what to do when a concern arises. A short written protocol, along with a habit of documenting client communications, can help you act quickly.
Ask your agent
An independent agent can walk through your policy’s notice provisions and help you time any carrier change. If you are unsure whether a situation warrants notice, ask your agent or the carrier promptly. We are glad to help.
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