Top Ten Strategies Insureds Can Use to Make the Most of Their Insurance Coverage
By Christopher Mosley and Brooke Pates
- Hire an independent broker and find the right one. Independent brokers have access to multiple insurance markets, giving them a greater ability to find an insurance program that matches your needs. In contrast, captive brokers work for one insurance company and are limited to placing policies written by that company. An independent broker's principal interests are more likely to reside with you than with an insurance company. Look for a good insurance broker - one that is knowledgeable about your industry, understands your business, and is able to help you assess the various risks you may face. When evaluating brokers, consider the same attributes you would seek from any other professional services provider - responsiveness, reputation for excellence, availability of resources, and ability to provide objective coverage guidance.
- Understand what kind of coverage is right for you. Several different types of insurance policies are available on the market today - including general liability, property, directors and officers, errors and omissions, and excess or umbrella policies, to name a few. You may need more than one type of policy to cover all the risks you will encounter. In addition, certain industries have more specialized coverage needs than others. Make sure you have a thorough understanding of the different types of coverage available and the particular types of risks you are likely to encounter so you can put in place an insurance program best suited for your risks, needs, and financial objectives. A qualified broker specializing in your industry can help.
- Pick the right policy. Once you know what types of coverage you need, it is important to pick the right policy to meet those needs. Carefully review the terms and conditions of the policy with your broker before you purchase it - paying close attention to the grant of coverage, exclusions, conditions, and endorsements. You may be surprised to learn that many basic policies don't cover the risks that are the most likely risks to occur. Thus, you may need to purchase additional coverage to obtain the precise coverage you need for your anticipated risks.
- Do not buy on price alone. Saving money in the short term may cost you in the end if your policy does not cover your risks or if you have to chase your insurance company to obtain the benefits to which you are entitled. It is important to make sure that the policy you select covers all your potential risks and that the insurance company will actually be there for you when you need to call on it to pay a claim. Consider an insurer's reputation for handling and paying claims. If an insurance agent or broker presents you with a policy that is substantially cheaper than other options or your previous policies, be skeptical. It may not provide coverage for all the risks for which you seek coverage, or the insurer may not have a good reputation for handling claims.
- Archive your policies. Maintain an archive of your insurance policies for many years so you have the tools and information necessary to more quickly analyze coverage issues and recover losses arising after a policy period ends. For example, construction defect and environmental risks are often first discovered years after a policy period ends. Prior policies may cover some or all of the risk from those losses. However, due to document retention policies, you should not expect your insurers will maintain copies of old policies. If you do not have a copy of a policy that may cover a loss, it will be substantially more difficult to recover from that policy.
- Start the renewal process early. We recommend starting the renewal process at least 90 days before your current policy expires. Doing so will give you ample time to meet with your broker or insurance agent to review your coverage needs, assess the quality of the service provided to you during the prior policy periods, and analyze any changing needs you have on a going-forward basis. Getting an early start will also give you sufficient time to evaluate options and put into place the proper coverage in the event that your needs have changed, the insurance company is proposing any significant changes to your coverage or premiums, or you decide to obtain coverage from a different insurer. You will need sufficient time to make these decisions and put in place the proper coverages. The worst scenario is that you get inadequate coverage or find that you have a gap in your coverage due to insufficient time to make appropriate renewal decisions.
- Know the names. It is imperative that you carefully check who is identified as named insureds and additional insureds under your own policy and any other policies under which you may be insured. Many businesses operate under a complex web of separate business entities. It is, therefore, critical that companies are not inadvertently omitted from or incorrectly named on insurance policies and additional insured endorsements. Also, make sure you are dealing with who you think you are. If you are contracting with other businesses or individuals and dealing with insurance requirements, confirm that the names on the contracts match the names on the policy documents and the names on the Secretary of State's website. Mistakes happen more often than you may think and can be incredibly costly - be diligent in checking the details.
- Notify the insurance company. In the event you do have a claim or become aware of a potential claim, immediately notify your insurance company and any other insurance companies that have issued policies that may potentially cover the loss. Many policies contain prompt notice requirements. Your failure to timely notify the insurance company may jeopardize coverage. Even if you elect not to pursue a claim under your policy, or if there may be coverage under other policies, it is imperative that your insurer have notice of any issues that may potentially lead to a claim under your policy.
- Keep the insurance company informed. Once a claim or potential claim arises, keep the insurance company informed about the status of the claim and any investigation. It is important that you give your insurance company the opportunity to participate in the investigation and resolution of a claim or potential claim. If you take matters into your own hands without providing the insurance company appropriate notice and opportunity to participate, you may jeopardize coverage.
- Seek help. If you have any questions about the benefits afforded by your policy, seek help from your broker or an insurance coverage attorney. If you believe your insurance company is denying your claim in error or delaying resolution of your claim, there are many resources available to you. Do not necessarily take "no" for an answer.
Attorneys in the Sherman & Howard Insurance Recovery Practice Group are available to assist with these and other issues.
Sherman & Howard has prepared this advisory to provide general information on recent legal developments that may be of interest. This advisory does not provide legal advice for any specific situation. This does not create an attorney-client relationship between any reader and the firm. If you want legal advice on a specific situation, you must speak with one of our lawyers and reach an express agreement for legal representation.
©2011 Sherman & Howard L.L.C. October 5, 2011