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Managing Claims And Losses
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Managing Claims And Losses


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    • 1. Managing Claims and Losses – Protect Your Insurance Coverage and Your Premiums Ariel DeJong May 30, 2007
    • 2. Organization & Due Diligence • Who is responsible for insurance in coverage in your company? • Risk manager or risk management department • Broker – good relationship important • Counsel (internal or external) – liaison critical • Access to coverage expertise essential • Understand the coverage you have • Read your policies and know what they say • Know what policies you have (CGL, Property, BI, Builder’s Risk, D&O, E&O, project specific) • Policies others you contract with have covenanted to provide – “additional insured” • Ensure your and others covenants to insure are being complied with
    • 3. Organization & Due Diligence • Keep all your policies including those others are obliged to place • Don’t throw away old policies (especially occurrence based) • Includes application, declarations page, policy wording, all endorsements • Don’t rely on your broker to keep copies • Manage, retain and store (30 years) • Make informed decisions about coverage • Avoid overlapping coverage • Avoid gaps in coverage (claims made, exclusions)
    • 4. Responding to a major claim or loss - General • Put together a team • Business drivers (marketing, production, customers, relationships) • Risk manager • In-house counsel • Insurance advisors (legal and other) • Experts • Why? • To understand potential coverage issues before claim or loss presented or denied (statements to adjusters) • To avoid denials by way claims and losses presented • To ensure compliance with obligations under policies • To manage information flow • To ensure coverage implications of decisions made are considered
    • 5. Responding to Claims (Liability – Third Party) • Reporting duty (read your policy - don’t assume) • Occurrence based policies • Report claims immediately before you settle or defend • Report occurrences • Report to all insurers under all possible policies • Delay – relief - policyholder good faith and insurer prejudice • Claims made policies • Report circumstances which may give rise to a claim • Report claims made during the policy period • Delay – can result in no coverage – no relief • Purchase extending reporting period coverage • Tender claims to insurer where insurer has duty to defend
    • 6. Responding to Claims (Liability – Third Party) • Duties of policyholder • Co-operate in defence and investigation of a claim • Access to documents • Protect right of subrogation • Not to admit liability • Not to make voluntary payments or settlements without insurer’s consent except at own expense • Non-waiver agreements • Don’t sign them without seeking advice – no obligation • Respond to them – invite specifics regarding coverage concerns • Reservation of rights – unilateral • Conflicts - independent counsel- can waive if don’t respond
    • 7. Responding to Claims (Liability – Third Party) • Duty of insurer to defend and indemnify • Duty to defend is broader • Real value in many liability policies • Not always a duty to defend but obligation to pay for defence • Dealing with denials of coverage • Don’t take no for an answer • Get it in writing • Obtain advice on coverage position • Respond to denials – ask for reasons • Challenge denial – meeting, lawyer’s letter, arbitrate, litigate • Be wary of limitation periods – can be one year from unequivocal denial of coverage despite what policy says (Demers case) • Insurance Act amendment being considered - 2 year limitation
    • 8. Responding to Claims (Liability – Third Party) • Allocation of defence costs between covered and uncovered claims • Insurer required to pay for all defence costs except those “solely and undeniably” referable to an uncovered claim • Onus on insurer • Costs which benefit both are payable by insurer • Allocation before judgment or settlement usually premature • Don’t agree to an allocation up front • Some policies have a specific allocation clause (80/20) • Get advice
    • 9. Responding to Losses (Property – First Party) • Report to insurer as soon as loss occurs • One person should be responsible • Failure to comply can result in no coverage • Understand potential coverage issues before you meet with adjuster – get advice • Consider retaining consultants and experts • Faulty design/workmanship/material exclusion – resultant damage • Soft costs/business interruption/delayed opening • Track costs and maintain records of expenses based on coverage • Sue and labour • Purpose: to require the policyholder to take reasonable steps to prevent imminent loss or damage to insured property and to require the insurer to pay for those costs
    • 10. Responding to Losses (Property – First Party) • Proof of Loss • Interim or final • Insurance Act sets out requirements (s. 6 of s.126) • Insurer required to send form • Get experts involved if complicated (sometimes these costs are covered) • Any fraud or wilfully false statement vitiates claim • Get advice on potential coverage issues before you file • Usually sworn – be careful and be accurate • Loss usually payable within 60 days – can’t sue till then
    • 11. Responding to Losses (Property – First Party) • Dealing with denials of coverage • See above • What are the issues in dispute (amount of loss or coverage) • Appraisers or experts needed?
    • 12. Lessons Learned • After each loss or claim evaluate outcome • Can you avoid unfavourable outcomes in future • Coverage gaps or overlap • Internal policies and procedures – how can we respond better