Friday, February 6, 2009

How to read an insurance policy: the known loss doctrine, part 3

In previous posts I have discussed the known loss doctrine here and here. The insuring agreement typically defines when a loss is deemed to have been known to have occurred as the earliest of when:

--An insured reports a loss to any insurer; or

--An insured receives a written or verbal demand or claim; or

--An insured becomes aware by any other means that a loss has occurred or has begun to occur.

Those definitions are important not only for the known loss doctrine, but also because insureds are required to report losses to their insurers immediately ("as soon as practicable") and their failure to do so could result in denial of coverage for the loss. (I will discuss in a future post when an insurer can get away with denying coverage as a reult of late notice).

Insureds often fear to report claims because the mere reporting of a claim may result in their premiums going up. Although I am not an expert in this subject (and any of you who are should feel free to chime in here), my understanding is that reporting a single potential claim that never materializes into an actual claim typically does not affect premiums. On the other hand, failing to report a potential claim that does materialize could substantially affect your right to insurance coverage for that claim.

The lesson: Report to your insurer any claim as soon as you learn of it.

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