When should you notify insurers of the crisis?
Most insurance policies require insureds to give notice of actual or potential claims by making a "notification". The policy under which notification must be given will vary depending on whether it operates on a "claims made" or "occurrence" basis:
- policies that operate on a ‘claims made’ basis generally cover claims made during the period of the policy, regardless of when the incident took place
- policies that operate on an ‘occurrence’ basis generally cover occurrences during the period of the policy, regardless of when those occurrences give rise to claims
The point at which you should make a notification in respect of an incident will depend on the contents of the notification provision in the relevant policy. It is therefore important to check those provisions carefully.
Consider with your insurance broker and legal advisers whether – on the information available – you have reached the point at which a notification should be made. Keep this under review as you obtain more information.
It is usually sensible to err on the side of caution. This means making a notification where there is any doubt as to whether or not notification is appropriate. This may help to preserve a relationship of trust with your insurer, which is of practical importance in securing payment under any insurance policy.
The consequences of making a late notification can be serious. Some policies permit insurers to refuse to pay claims related to a late notification, even where the delay has caused no prejudice to the insurer.