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Due Diligence Investigations
“This number (224) likely represents just a small fraction of the notice-based denials that never
make their way to a courtroom. More must bedone to educate policyholders on how to comply with their policies’ claims-made reporting requirements. How did notice-based denials under claimsmade forms become so common? To understand how the industry has arrived at this
point, it is important to explore the history and evolution of the claims-made form.
There are six main reasons for these denials.
1.Late reporting of a claim after policy expiration
2.Failure to disclose known claims or potential facts and circumstances that could
give rise to claims later on an application (and not reporting same under the notice
of potential claim provisions)
3.Failure to identify that the current claim being reported is related to a prior claim reported to a previous insurer or previous policy with the same insurer
4.Failure to disclose prior-pending claims made on an insurance application
5.Reporting the claim in a manner that is not as directed by the policy language itself
6.Claims denied for not reporting “as soon as practicable”
The main driver of denials is that the policyholder reported the claim after the policy expired, as represented by 101 denials upheld by the courts. Not too far behind that category is
the situation where the insured knew of a claim or wrongful act before the inception of a policy.
Here is a breakdown of the six categories. … “
“There are inherent dangers when a company is acquired, not only for the selling company, but for the acquiring company. It is not uncommon for the buyer to require the seller purchase several years of extended reporting coverage. This is because the buyer, when either acquiring the assets or the stock transaction, wants no exposure to any known or unknow liabilities created by activities before the acquisition.
We’ve all seen companies get acquired, with the seller invoking whatever extended reporting coverage they can acquire, sometimes at a significant price. But that is not the only problem, and this is where the approach and analysis become important. Asking the right questions is thus necessary to provide the appropriate financial protection to those involved, with the avoidance of any error and omission claim that might be made against the broker, despite whether they are simply following an “order take” standard or not.”
R. MICHAEL STROMAN SUMMARY R. Michael Stroman has over 42 years of experience in the insurance industry. Currently serving as an industry consultant, he assists insurance purchasers, insurance companies and agents, and their attorneys, accountants, and other industry advisors, with agency management, claims consulting, underwriting practices, standard of care, and other technical assistance. Mr. Stroman…
Chris started INS Capital Group (ICG) when he saw a need for a quality, professional advisory firm to assist business owners in the insurance industry with exit planning, M&A and capital raising activities. Chris’ career in the insurance industry has focused on mergers, acquisitions and financing options for agents. Prior to founding ICG, Chris worked…
The advantages and disadvantages of joining an Agency Network…and the issues to be considered in selecting a suitable Agency Network.