At it’s simplest, insurance is about the transfer of risk from a business or person to an insurance company. In exchange for the payment of premium, insurance companies agree to provide an insured with a degree of financial protection (e.g., cost of defending you in a claim and any monetary award you are legally liable to pay).
Since claims are the primary reason you purchase an insurance policy, we believe it is important for our customers to know when, why and how to report claims, as well as how claims affect insurance rates.
When should I report a claim?
Easy enough question, right? Not really. It’s surprising how many people are unsure about when they should notify their insurer of a potential or actual claim.
First and foremost, coverage is contingent on promptly reporting any potential claim or claim to your insurance company. Business Risk Partners’ (BRP) insurance policy for home inspectors is called a “claims-made and reported” policy. Simply put, this means that we will provide you with coverage for claims made within your policy period and after your retroactive date, as long as they are promptly reported within the same policy term.
Why should I report a claim?
The earlier we know about the incident, the earlier we can take steps to protect you and ourselves at the same time. Secondly, should an actual mistake have been made, it is easier and cheaper to settle claims in the early stages of development. Finally, notifying your insurance carrier, which is part of your policy, works to your advantage. Why?
Attorneys will help mediate and/or provide advice on how to handle potential claim situations.
• BRP uses an experienced team of attorneys who deal with home inspector disputes on a daily basis; they know how to protect you.
• These attorneys know when to settle and when to fight back.
• They know what makes sense to pay and/or what lawyer will be best suited to work with you to defend you and your company in a cost-effective manner.
Under what circumstances should I report a claim?
To answer this question, it’s necessary to review the definitions of a claim or potential claim set forth in your policy.
Always refer to the policy form, which includes definitions for these specified terms (please note that defined terms are always in BOLD). Our policy reads as follows:
A “Claim” is defined as any civil action, suit, proceeding or written demand received by any Insured seeking to hold the Insured responsible for Loss as a result of an alleged Wrongful Act committed by any Insured.
Based on this definition, here are some examples of what we would consider to be a claim:
• Legal papers
• Arbitration papers
• Letter demanding money
• Letter from an attorney
And then, there is the potential claim; the incident that doesn’t quite meet the definition of an actual claim, but should be taken just as seriously and should be reported to BRP per the following insurance policy wording:
“If the Insured becomes aware of a Wrongful Act that may reasonably be expected to give rise to a Claim, and if the Insured reports such Wrongful Act to the Insurers during the Policy Period in writing, then any Claim subsequently arising from such Wrongful Act duly reported in accordance with this paragraph shall be deemed under this Policy to be a Claim made during the Policy Period in which such written notice is received by the Insurers. Such written notice to the Insurers shall include a complete and comprehensive statement of the facts and circumstances surrounding the Wrongful Act.”
Based on this reporting requirement, here are some examples of what we would consider a potential claim:
• Phone call from an attorney
• Homebuyer (client or otherwise) buys a home, then later discovers significant problems (apparent or hidden) and tells you all about them, and/or
• Multiple calls from the same irate customer regarding inspection, who is threatening to take action and also refuses to let you reinspect the property.
How will this affect my insurance premium?
BRP reviews each claim in detail months before your policy expiration date. We look at all of the facts and determine whether an error was indeed made on your part, while at the same time confirming agreements were also signed prior to that inspection. Some claims are frivolous and some are not. We always take this into consideration. Many inspectors believe that because they have reported some frivolous lawsuits to BRP that their insurance premiums will automatically increase; this is not always the case. We take the review of claims seriously and weigh all of the facts surrounding the case. This will then determine what will happen with your policy pricing.
Please remember that every unresolved call back has the potential to develop into a claim. Try to read your customer and his or her demeanor. Attitude usually tells the story. If you are unsure, please use your resources. Call your agent representative to discuss the matter. You have much more to lose by not reporting claims or potential claims than by reporting them.
Note that the home inspector policy information provided is intended to be a summary of coverage. Please reference your policy at all times. All terms and conditions of the policy supercede all representations above.