To Notify or Not to Notify | Claims Notification

The subject of claims notification can be a challenge, significantly some vexing questions will be before the Court of Appeal and High Court in the not too distant future. It is a very tricky area for insurance brokers because two brokers with similar experience, or similar client books might give you two totally different answers to the question ‘Should I notify?’.

We understand that it’s a topic that continually sparks intriguing dialogue and debate.  With that said, this article has been prepared to assist you to navigate some of the issues when you inevitably need to consider this question in the future.

The Beauty of Claims Notification: Advantages for Clients

The key word here is protection. At the very inception of the ‘notification chain’, lies the crucial step of brokers’ clients notifying them about an event affecting their business that may give rise to a claim against them in the future. This step, while often overlooked, actually presents the broker with an opportunity to engage with their client and add some real value and advice about notifying the relevant insurer.

Investing time in educating your clients about notifiable events yields practical advantages for them, and these are certainly worth sharing, such as:

1. It may safeguard their entitlement to claim under their relevant existing insurance policy. The ability to proactively assure them that their rights will be preserved even if they make a claim at a later point can provide clients with peace of mind.
2. Notification of circumstances that may give rise to a claim does not infringe on the right to claim in the future it offers protection, even if the insurers are replaced subsequently.
3. It can act as a protective shield if a client’s insurer decides to alter their underwriting criteria or the coverage they offer for certain risks. If an event goes unreported, and a policy change is implemented, the chance to make a claim for an event may evaporate.

The Art of Notification: When?

The timing and content of notifications are vital elements. A strict interpretation would recommend ‘as soon as possible’.  A more pragmatic approach may be ‘sooner than you might anticipate, and quicker than might be convenient’. The best advice is, as the saying goes, “if it crosses your mind, notify.”

Why? Because for your clients, often their first reaction, when a notifiable event occurs, is not typically to inform their insurance broker (although it should be). Their focus is likely to be on mitigating loss, damage control, recovery, and ensuring staff safety.

However, policy wordings can often express the notification requirement using terms to the effect of ‘facts, matters or circumstances that might give rise to a claim as soon as practicable upon being discovered by the insured’. The sooner notification occurs, the more likely your client will comply with their policy obligations and the less likely there will be issues if the notification converts to a claim. Embedding this practice also helps to lock in a good habit of regular communication between the client, broker, and the relevant insurer when notifiable events arise.

The Art of Notification: What?

The effect of a ‘valid’ notification is that if a claim is subsequently made in later years, the insurer on risk at the time of the ‘valid’ notification would be liable (subject to the terms, conditions and exclusions of the relevant policy) to pay out on that claim if the claim arose out of facts or circumstances notified.

We emphasise the importance of ‘valid’. Why? As explained above, only a ‘valid’ notification safeguards your client’s right to claim. So, what are the desirable attributes of a ‘valid’ notification? The prevailing case law in Australia and other comparable jurisdictions provides assistance. Taken from these authorities, the notifications should:

1. identify the basis of a potential claim;
2. be specific and not general (i.e. point to specific, events, incidents or transactions and when they occurred);
3. concern circumstances which, objectively evaluated, create a reasonable and appreciable possibility that it will give rise to a claim; and
4. relate to circumstances of which your client is aware (i.e., not speculative).

The Art of Notification: How?

The ‘how’ to notify might differ across insurers and types of insurance. Nowadays, most insurers have customer relationship management systems that log all client interactions, regardless of the channel used for interaction.

We have also observed a significant move by insurers towards automation and digital processes for notifications and claims.

Whether you are notifying by phone, email, portal or platform, it is best practice to ensure you receive an identifier (e.g. a reply, receipt ID or interaction ID) confirming lodgement of the notification. If an identifier is not automatically supplied or generated, you should request evidence the notification has been received. As insurers transition towards automation and digital solutions, some hiccups are inevitable. Protecting your clients from the ‘we don’t have any record of that notification’ scenario is something that can be easily prevented.

Notification: Tangible Impacts on Clients

Let’s debunk some common misconceptions among clients (and some brokers) about notifications under a Berkley Insurance Australia (BIA) policy. We’ve tried to demystify these below:

‘Notification increases my premiums’ – this is a myth! In the context of a notification, BIA will only consider premium increases when claims costs are associated with the notification. Not all notifications convert to claims. An insured may notify without necessarily seeking an indemnity at a later date if a claim is not forthcoming.

‘Notification is optional’ – another myth, dangerously ill-conceived, and likely to compromise your client’s cover!  BIA policy wordings contain an obligation for an insured to notify BIA when they first become aware of relevant facts, matters and circumstances for notifiable events. Your client can preserve their future right to make a claim by adhering to their notification obligations. Even if you or your client are not sure whether to notify, we recommend reaching out to us and we can provide some feedback.

Notification of a Claim Takeaways

If you’d like to learn more about notification best practices or have a practical example you’d like to discuss, please don’t hesitate to get in touch with one of our specialist underwriters or claims adjusters to discuss how we can assist you and help resolve your queries.

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Berkley Insurance Company (limited company incorporated in Delaware, USA) ABN 53 126 559 706 t/as Berkley Insurance Australia is an APRA authorised general insurer. Information provided is general only, intended for brokers and has been prepared without taking into account any person’s particular objectives, financial situation or needs. It is not intended to constitute legal advice. You should always obtain legal or other professional advice appropriate to your own circumstances. Insurance cover is subject to terms, conditions, limits, and exclusions. When making a decision to buy or continue to hold a financial product, you should review the relevant Policy Wording.