A guide to claims made insurance

Claims made insurance covers claims brought against you while your policy is active. A claim could be a written or verbal demand for compensation, a request to put something right or notice of a regulatory investigation — the exact details depend on what your policy includes.

With claims made policies, you usually have to tell your insurer as soon as you know about a claim, or even a potential claim (often called a circumstance).

Circumstances are issues you spot during your current policy period that could later lead to a claim. For example, it could be a mistake you realise you've made — whether or not anyone else has noticed — or an issue reported to a sales rep or someone in your customer service team alleging that you've done something wrong.

Most claims made policies won't cover claims or circumstances you were already aware of — or should reasonably have been aware of — before your current policy period began.

If a claim has been made against you, you must get your insurer’s written consent before you:

• Admit any liability
• Appoint a lawyer
• Incur any costs or offer to make any payments

Should you feel that you need to acknowledge an email or letter received from the other party, keep it brief. Something along the lines of "We confirm receipt of your letter and will respond to it as soon as possible" is usually sufficient.

As a general rule, you should notify your insurer of all claims and circumstances that may lead to a claim as soon as you become aware of them.

Your policy will tell you how to notify your insurer and the timeframe you have to get it done. This could be:

• Within a fixed number of days of becoming aware of them
• Within the policy period
• Within a set amount of time after the policy expires

The language used in your policy documents is critical here.

If your policy says that you need to report circumstances that are likely to result in a claim, you need to tell your insurer about things reasonably likely to result in a claim.

If your policy requires you to report circumstances that may result in a claim, then you need to tell your insurer about all circumstances, regardless of how unlikely.

Your policy will also set out who in your business needs to become aware of a claim or circumstances before it has to be reported — formally called a notification condition.

Generally, if the policy says "you", the "insured" or "policyholder", it means when anyone in your business becomes aware of it, no matter their role or seniority. Some policies, though, may specify that certain people, like a director, risk manager or legal counsel.

By not following these notification conditions, your insurer might not be liable to pay your claim — they may not pay.

If you have cover with Superscript, we can help you decide whether something should be notified — but we can only do this if you let us know what happened as soon as possible.

Once you've told your insurer, any costs the policy covers will be tied to to that policy period — even if the final legal bill doesn’t come until years later.

Your insurer will usually ask to see a copy of all communication between you and the other party, plus any relevant paperwork like contracts or agreements.

Your policy may specify who is responsible for defending you in the event of a claim. Usually, your insurer will either have a duty or a right to defend you.

There are pros and cons to this. If you're expecting your insurer to appoint your legal defence and pay the costs on your behalf, you should make sure that your policy says they have a ‘duty to defend’ you.

If they have a right but not a duty, it means that they can take control of proceedings if they want, but — ultimately — it's your responsibility to appoint your defence and seek reimbursements from your insurer.

Insurance is a heavy-jargon industry. Because of this, it can sometimes be difficult to understand your policy.

To make sure you’re fully aware of what you need to do if a claim is made, it’s important to understand claims made policies. It could be the difference between a successful and unsuccessful claim.

Here are some top tips to get to grips with your claims made policy:

• Review your policy documents and understand what you need to do when you (or someone in your company) become aware of a claim or circumstance
• Implement a process for recording potential claims and ensure that the relevant people are made aware of it
• Make sure you follow the claims notification procedure explained in your policy wording
• Get clued up on making a successful claim
• If you’re unsure, speak to Superscript

Get to grips with more insurance jargon in our business insurance jargon buster.