What happens if I do not report a claim or potential claim?
A lawyer’s failure to immediately report potential claims could result in the loss of coverage despite paying a sizable premium. Obviously entering into settlement talks or defending a claim without reporting it allows the carrier to later deny coverage.
Coverage can be lost in at least two ways.
First, failure to disclose a potential claim on the application will give the insurer the right to rescind the policy entirely if the misrepresentation is material. The policy is void and the premium refunded leaving no coverage for any insured.
Second, most claims made policies do not cover any act, error or omission that an insured could reasonably have foreseen, when the policy was purchased.
Note that an insured’s belief that a claim is frivolous will not serve as an excuse for failing to give notice; the insurer has a “duty to defend” even frivolous claims and prefers to know in advance about any potential claims.
Lawyers should take their own advice and seek counsel. Carriers are ready willing and able to assist with claim mitigation efforts and client disclosure. Often the carrier will provide ethics and malpractice experts to assist in reporting ethical matters and disclosing issues to clients in a way that preserves any defenses to a potential claim.
Contact us now for two recommended strategies that could assist in preventing a loss of coverage. Implementing each strategy will take only one minute of your time annually but could prevent an expensive uncovered claim.