Late Claim Notification May Mean "No Claim"
All short term insurance policies contain a clause detailing the procedure when submitting claims. In general terms this clause compels you, the Insured, to give your insurers notice, as soon as reasonably possible, of any event which may give rise to a claim.
But the claim may never materialise…?
In our experience a frequent reason for claims being rejected by insurers is due to late notification. We find that clients are either remiss or late in notifying claims to their insurers as they believe that the potential claim may never actually materialise. Moreover, we have found that clients are under the misconception that the policy allows them to lodge a claim at any stage, at their option. This approach to short term insurance claims is a recipe for disaster and may directly result in a rejected claim, which may otherwise have been paid, as the policy contract requires you to inform insurers, as soon as reasonably possible, of any event which may lead to a claim.
Why do insurers insert this clause?
Insurers insert this clause to ensure their contractual rights are not compromised in any way. A good example of this would be a stolen vehicle. If your vehicle is stolen and you notify your insurer one week later, their chances of successfully recovering the vehicle are diminished. In this case, they would be well within their contractual rights to decline your claim as you would have denied them the opportunity of recovering the insured asset (early notification would potentially reduce the amount of the claim and in some cases the whole claim) via the vast amount of resources at the insurers disposal.
What about potential liability claims?
Another common mistake made by clients is to attempt to handle a legal liability claim without the insurers knowledge. In most cases the clients attempt fails and they then lodge a claim when they receive a summons from the third party (sometimes years later!). This unfortunately is too late and will lead to a claim rejection given that the insurers rights were compromised due to Late Claim Notification i.e. insurers would have either defended the claim using their legal resources or they would have settled the matter out of court, at their option.
The rule of thumb approach to avoid Late Notification issues
The rule of thumb to avoid falling victim to a claim denied on the basis of Late Notification is to notify your insurer and /or broker of any event that may give rise to a claim, no matter how small or trivial the event may seem. Rather let your insurers take whatever action they deem fit – this is after all why you pay them insurance premiums