March 2013 15 policy period is an essential part of a claims-made policy’s coverage terms and, indeed, a condition precedent to coverage. The reporting requirement defines the limits of the insurer’s obligation. The provision requiring reporting of a claim within the policy period or a defined time thereafter (the grace period) allows the insurer to determine with certainty the time after which it will no longer face liability. A majority of jurisdictions recognize that an insurer is not required to establish prejudice to deny coverage when the insured fails to provide notice of a claim within the policy’s specified reporting time frame. One caveat to consider is when notice to some other entity may qualify as notice to the insurer. Again, examining the policy’s reporting requirements is an important first step. The policy should delineate to whom notice should be provided. Claims handlers should be mindful when a policy allows notice to be provided to a broker or some other agent of the insured. If notice is timely provided to the insured’s representative or party permitted by the contract language, then a delay in reporting the claim by such agent or broker to Underwriters cannot alone be used as a basis to deny coverage to the insured. To illustrate, assume a claims-made-and-reported policy expires on 31 October 2012, with a 45-day grace period for reporting of claims and that claims may be reported to the insured’s broker. An accident occurs on 1 January 2012. A lawsuit is filed on 31 August 2012, and the insured reports the claim to its broker on 29 October 2012. The broker notifies Underwriters of the loss on 1 January 2013. Underwriters receive notice after expiration of both the policy period and the grace period for reporting claims. However, notice will nevertheless be deemed timely and provided in compliance with the policy’s reporting requirement which allowed advice of a claim to the broker. A final inquiry with respect to notice under both claimsmade and occurrence policies is a determination of what type of notice will suffice to require an insurer to respond to a loss. In some jurisdictions, if an insurer has actual notice of the loss, for example, the insurer was also named in the suit and its agent for service of process was served or another party has reported the claim, coverage cannot be avoided simply because of a failure of the insured to itself notice or tender the loss to Underwriters. However, in other jurisdictions, courts require the insured to actually tender the lawsuit to Underwriters and to request a defence of the claim (if there is a defence obligation in the contract) before coverage under a policy is triggered. In the event of untimely notice, rights should be reserved pending determination of the applicable law and relevant facts and issues. Concluding remarks As has been illustrated, the interplay between occurrence and claims-made policies can give rise to many coverage questions. Resolution of these issues depends on the language of the policy at issue, the jurisdiction which will interpret it, the facts governing when a claim as defined by the policy was first made, whether and when Notice of Circumstance or exercise of a Loss Notification Option was had and how and when notice was given or received. The prudent claims handler should be aware of the terms of the particular policy form at issue to spot coverage issues as they arise and correctly identify the implicated policy early on. The insured should be notified as soon as possible which policy is invoked so that any disagreements can be resolved before any substantive decisions are made, as only the Underwriters subscribing to the correct policy should make them. © 2013 Xchanging