Notify Possible Claims and Known Circumstances to your Insurer
If there is any claim or potential claim, or even a circumstance that could reasonably be expected to give rise to a claim, it must be reported to your insurer immediately, regardless of your own view as to fault. If you know of a claim or circumstance and it is not reported within the insurance period in which it arises, your insurance policy is unlikely to respond.
This is because if a claim eventuates from the notified circumstance, the insurer cannot deny indemnity, despite the fact that the claim arose outside the period of insurance. Furthermore, if you change insurers, and you have a known circumstance with the new insurer, it will not be accepted.
What is a ‘circumstance’ that could give rise to a claim?
This varies from insurer to insurer, so always check your policy first; generally the definition of “claim” will define what a notifiable event is. The advice we commonly provide our clients with is that, if an employee reports a mistake that could potentially give rise to a future claim, you should report it. Consider if the error is likely to cost your client money or be a breach of your company or professional guidelines.
We should also dispel any beliefs that any incident reported to an insurer will cause premiums to rise. Not true, unless the issue is likely to result in a claim. Instead what this does is demonstrate an understanding of the policy holder’s obligations to report any issue that might later require the policy’s assistance – something that is viewed very favourably by insurers in most cases.
Failure to Notify
If you fail to notify your insurer of a known circumstance, your claim could be denied. It will also be subject to Section 54 of the Insurance Contract Act (the Act), that:
- Prevents an insurer from relying on a term of a contract of insurance to refuse to pay a claim because of an act or omission of the policyholder that occurred after the policy began; and
- Specifies that the insurer may seek to reduce the amount they pay by proving the extent of the prejudice they have suffered because of the late
Failure to notify leaves the policyholder open to a dispute over the indemnity of a claim and they run the risk of subsequent policies being cancelled due to non- disclosure, either fraudulent or innocent.
If in doubt, always notify your insurer and if a circumstance arises in to a claim, you have complied with the claims disclosure requirements under the insurance contract.
After Advice or A Quote?
Optimum Insurance Services are qualified insurance advisers. We welcome all enquiries in relation to our insurance products and services. To obtain advice or a competitive quotation enquire online. If you would like to discuss your specific needs further, please call 1300 739 861 and speak with our friendly and helpful advisers.