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DIY Approach
Insurance companies may always prefer to be notified immediately about any
potential claims, but in-house counsel have valid reasons to advise on holding off
on a notification in some situations.
“You have to weigh the pros and cons,” says Charles George, partner at Patterson,
Dilthey, Clay & Bryson, L.L.P. “There may be reasons to handle it yourself.”
The language also tends to be boilerplate—
notice provisions usually call for policyholders
to notify the insurance companies “as soon
as practicable.” This is a vague definition
that can allow for disagreements between
policyholders and insurance companies,
with the insurance companies often arguing
that they should have been called in sooner,
no matter when a claim was filed.
Some situations also evolve so slowly it
can be difficult to determine when a
seemingly small glitch becomes a matter
for an insurance claim. The scope of a
problem may not even be clear to the
businesspeople who are working closely on
the situation. And if it’s not clear to them,
employees may not think about alerting the
legal department until it is too late.
Variations Abound
Even if a company files a claim, state policies
vary widely. For instance, under Virginia law,
the passage of time can be enough to violate
the notice provisions—if a company doesn’t
report an incident immediately, the claim
can be denied. But under North Carolina
law, there has to be a showing of prejudice
to the insurance company for the claim to
be denied, regardless of any time delay.
“That’s just one example of two different
states interpreting ‘as soon as practicable’
differently,” he says. “From state to state,
one needs to be aware of the differences.”
George points to a case in Virginia where a
company waited 126 days to file a claim,
only to have the insurance company deny it.
From a business’ perspective, four months
may not be much time in which to identify
a potential claim and decide whether to
report it, says George.
The differences between states is further
complicated for companies with business
around the country. Simply determining
which state’s standards are applicable can be
Good reasons to avoid notifying an insurance company about a situation that
could evolve into a claim include:
■ Business relationships
Two companies with a good relationship may feel they can settle the issue
themselves rather than bring in the insurance companies immediately.
“If you’ve worked with someone for a long time and things are not working out,
oftentimes, parties will stick with the situation and try to resolve it themselves,”
he says. “Or you may have a situation where you are hoping to keep a good
customer happy.”
■ Differing interests
Insurance companies and their policyholders don’t necessarily share common
interests and goals. Insurance companies report to their own stakeholders, and
they are most interested in resolving disputes for the lowest cost possible,
according to George. A policyholder, on the other hand, may be far more
interested in retaining a business relationship—something that doesn’t worry
the insurance company.
■ Rising costs for claims
The more incidents a company reports, the more likely it is to see insurance rates
increase. Some corporate situations are the equivalent of a fender-bender that
doesn’t require bringing in the insurance company. “If you rear-end someone and
you may be able to fix it for $100, you wouldn’t necessarily call the insurance
company,” George points out. If you can convince the other party to send you the
bill from the body shop, you’ve saved yourself rising rates and a lot of paperwork.
a time-consuming process. George points to
another client that was headquartered in
Georgia, had purchased insurance in North
Carolina and then had a claim in Tennessee.
Determining which state’s rules to follow
took some time to figure out.
The key to determining whether to call
in the insurance company often hinges on
specific notice provisions and the laws in
individual states. When deciding whether a
situation warrants involving an insurance
company, in-house counsel must understand
the ramifications of what could happen if
they do, and what could happen if they
don’t. “Consider whether the insurance
might apply, and the pros and cons to your
organization in reporting it to your insurer.
When in doubt, give notice to the
insurance company,” George advises.
Patterson, Dilthey, Clay & Bryson, L.L.P. is a
firm comprised exclusively of trial lawyers
who are actively engaged in the defense
of civil litigation throughout North Carolina.
The firm’s attorneys concentrate their
practice in the defense of products liability,
premises liability, extra-contractual litigation,
medical malpractice, workers’ compensation,
insurance coverage, automobile liability and
other civil defense litigation.
Article Participant:
Charles George
Partner
cgeorge@pattersondilthey.com
JULY 2007
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