Should you notify your insurance carrier or not?

The New York Times ran an interesting article about a potentially devastating mistake by, of all places, Harvard: Failing to notify one of its insurance companies may cost the university $15-million. To be sure it depends on your insurance policy, what your deadline will be. Different policies set different deadlines. Some set a certain number of days following an “occurrence,” some after a “demand.” Some don’t specify days but use language like “within a reasonable time” or “promptly.” In the employment context, one could see a policy, just as an example, that sets a 30-day deadline from when a “claim” is “made.” The policy may then define those terms, and, as just one example, it may be that the policy language states that a simple “written demand” suffices to trigger the 30-day notice deadline. Whatever the policy language, insurance policies often do not allow insureds to, then, just “wait and see” if a matter turns into something serious; insurance companies often argue that they insert these deadlines because, they contend, part of their bargain is that they (the insurance company) want to be involved early in the process, so that they can help, they believe, to contain costs. On the other hand, insureds are also correct in many cases to argue that extenuating circumstances apply and that such deadlines should not operate as “get out free cards” for insurers. In short, insureds (whether companies or individuals, in an employment context or in any context) should familiarize themselves with the policy language that they’ve paid for, then be sure to strive for compliance, in order to avoid just this kind of lawsuit.

According to the New York Times, Harvard now finds itself in a lawsuit with its own insurer over whether it missed its deadline.

But Harvard did not alert Zurich, its excess insurer, which was meant to cover the next $15 million, until long after the policy’s deadline had passed.

***

“Somebody seriously messed up,” said Tom Baker, a law professor at the University of Pennsylvania. “I teach about this stuff. One of the things you teach people about claims-made policies is that you’ve got to provide notice early and often.”

Whether Harvard will lose $15-million in insurance coverage is for the courts to decide, but the issue itself provides a good object lesson for insureds. Interested readers will find links in the New York Times article to briefing by both Harvard and its insurance company.