Avoiding Late Notice Claim Denials in Claims-Made Professional Liability Claims

• By: Nancy Germond
• October 1, 2025

Most agents are very familiar with reporting requirements on occurrence policies. The occurrence happens—a tenant fire, a slip and fall, a dog bite—and the insured knows almost instinctively to report the claim. The trigger of coverage under an occurrence policy is usually more obvious, it’s whenever the loss occurred (i.e., the time and point when the injured party’s property was damaged or that party sustained bodily injury). Under a claims-made policy, however, when to report is trickier.  

First, let’s review some of the policy types that are generally written on a claims-made basis.  

Types of Policies That are Generally Claims Made 

Here are some of the coverage forms normally written on a claims-made basis. 

• Cyber liability 
• Directors and officers coverage (D&O) 
• Employment practices liability (EPL) 
• Fiduciary liability 
• Management liability/executive liability coverage
• Occasionally a commercial general liability policy
• Pollution liability 
• Product recall coverage 
• Professional liability coverage for professionals such as attorneys, architects, or anyone or business entity that provides a “service” to a third party for a fee, etc. 

Since carriers write most management and professional liability policies on a claims-made or claims-made-and-reported basis, the appropriate notice of a claim to the carrier is of extreme importance. The time and point at which a claim is made which triggers coverage under a claims-made policy, as we will see, can be subject to great debate.  

According to Frederick J. Fisher, author of Claims-Made Insurance: The Policy That Changed the Industry, “Today, claims-made forms are rare. They have been replaced by claims-made-and-reported forms.” 

We Know You’ve Heard It Before—”It Depends” 

Both the insured and the carrier have rights under the policy, and the courts will enforce both parties’ contractual rights. That is why when you call your underwriter, even if they refer you to the claims department to discuss coverage on a potential claim, the adjuster will always say, “It depends on the facts.”  They will rarely tell you if a hypothetical is or isn’t covered. 

This answer will not only drive you crazy, but it will expose you to an errors & omissions (E&O) issue if you provide advice that hinders the claim notice process. It is critically important that you offer the correct advice to your insured client so they can fulfill their reporting duties properly under a claims-made policy. 

That Scenario that Can Lead to an E&O Claim 

You did your job, right? You helped the insured with the application questions; you submitted the application; and the carrier bound coverage. You placed the appropriate insurance policy for your client, yet the carrier denies a claim because the insured failed to meet the claim reporting requirements under the insurance contract, any advice you provided regarding when to report can come back to haunt you. 

When the insured pays for a policy and their expectation of cover is unmet, all parties lose in some form or fashion.  

Relevant Policy Language Helps to Determine When an Incident Requires Carrier Notice 

Generally, the claims-made policy will define “claim.” It’s important the insured understands what types of incidents meet the definition and when they do, provide prompt claims notice to the insurer as specified by the policy. The definition may be found on the Declarations page or in the Conditions section of the policy where claim reporting instructions may otherwise be found. Additionally, there are times your insured will refuse to report a claim although you advise them to. What is your responsibility in this event? After all, you have a contractual obligation, and that contract may require you to report even though your insured disagrees.  

Next, look at the claims notice provision in the policy. How do these provisions outline the insured’s obligations to report under their contract 

Next, look at relevant exclusions and pending or prior claims. Is there a retro date that could preclude coverage?  

Also in some instances, claims-made policies require reporting within the active policy period. It is essential the insured understand that the policy may require reporting within that policy period. Insureds who are more accustomed to occurrence forms may not understand this nuance.  

If the insured still does not want to report the matter, tell them in writing what the reporting requirements are, and that failure to follow them could very well result in a claim denial, according to Fisher. 

How to Help Your Insureds Report Timely 

Agents can help avoid negative situations by providing your insureds with awareness and education, especially when you offer and preserve this advice in writing. Your insureds may believe their reasons for not reporting are excusable. However, here are just a few circumstances your insureds should avoid.  

• Your insured believes they have a reasonable reason not to disclose a matter to the carrier. Many courts have nixed this idea. Educate the insured on what constitutes a claim which may have insurance implications.  

• Reasonable clerical mistakes are not an excuse for late notice in the eyes of the court. Always review policy language that states that the individuals’ knowledge of a claim begins the time period in which a claim notice must occur. Improper response time is more likely with less experienced and administrative positions within most organizations.  

• The insured fails to disclose knowledge of a wrongful act that can reasonably give rise to a claim. Educate your insureds about any notice circumstances provisions and known wrongful act exclusions and related questions on the renewal application if applicable. The renewal process is a good opportunity to remind the insured and inquire about any potential claims.  

• Educate your clients on their ability to invoke the “safety net.” These are provisions in the policy if they think a claim may later be made or if they are aware of anything which, as above, later becomes a claim. These safety nets usually found in the conditions section of the policy and may be the “notice of circumstances” or “potential claim provisions.” This too may trigger the policy if done as required, according to Fisher.  

When in Doubt, Report it Out (and Up) 

In my days as a claims person, you could usually rely on the carrier to notice all the other excess carriers of claims that are heading south. In today’s sophisticated world with towers of coverage, you can no longer rely on the primary carrier to properly notice all the excess carriers. Increasingly, we are seeing these types of losses occur, which will invariably fall back on the agents.  

When limit towers are in place for the insured and the primary carrier is properly noticed of a claim, but the excess carrier(s) are untimely noticed, this can be a big problem for agents. Always notify excess carriers at the time you notify the primary carrier. Language that states the carrier must be prejudiced by a late notice to issue a claim denial is optimal; however, few carriers agree to such wording. This means simply that it is harder for an insurer to deny a claim for late notice unless they have been substantially prejudiced by the delay. However, not all carriers will agree to this language.  

However, Fisher states, “The concept of prejudice is no longer applicable to claims made and reported policies. 

Review Relevant Policy Language 

Look for the claim definition, and the reporting requirements which determine which specific occurrences “start the clock” for when an insured must notice the matter to their carrier for coverage to apply. In theory, the earlier the incident meets the definition of claim, the better because expenses incurred by the insured in responding to the matter can count toward any applicable retention/deductible or the policy proceeds. However, this can present a conundrum as an earlier claim trigger also mandates an earlier notice period.  

For example, claim wording definitions that include “a demand for monetary, non-monetary, or other relief” is generally a coverage enhancement because claimants often initiate their claim by making a demand for relief prior to formally filing a lawsuit. Insureds need to be aware of this early claim trigger. Waiting until the claimant formally files suit to notify the carrier increases the risk of a late-notice denial because the carrier can cite that demand in determining when the claim was first made. 

Claims-made policies may offer coverage for “pre-claim” expenses. Expenses often arise when addressing informal investigations or information requests. Insurers consider this policy provision an enhancement, because adequately responding to such requests can be costly. Agents should try to procure this enhancement. Delaying notification to the carrier until a formal investigation or proceeding begins may risk coverage due to a late notice. 

Notice provisions state which individual(s)’ knowledge of a claim determines when the insured should notify the carrier. Wording typically includes a phrase such as “as soon as practicable after such an individual becomes aware of the claim.” The provision may also provide a time limit in which to report. 

Ideally, the notice provision limits the number of individuals whose knowledge starts the clock. Most insureds should limit that duty to the entity’s risk manager or an equivalent position. However, when the notice provision allows for time to notice a claim after the policy’s expiration date, the insurer may view any insured’s knowledge of a claim as the time the claim was made  

Pending or prior acts/retro-date/known wrongful acts exclusions help to protect the insurance carrier from extending coverage to an insured exposed to a current claim or potential claim. The best metaphor for such exclusions is an insured trying to buy flood insurance while a hurricane is approaching.  

It is ideal to match the pending or prior litigation or retroactive dates from any of the insured’s previous policies and remove any known wrongful act exclusions. However, a carrier’s agreement to amend or remove these exclusions differs among professional liability products. However, a new insurer will never cover “known” wrongful acts, so if you have coverage in force, report those using the potential claim provisions as mentioned above and below, according to Fisher. 

A notice of circumstance or a potential claim provision allows the insured to provide notice of a wrongful act that the insured believes may give rise to a future claim. If a claim ultimately results from the noticed wrongful act/circumstance, then the carrier will acknowledge the original date the insured provides notice of the circumstances as the date of notice of the subsequent claim. It is ideal to include this provision wherever possible.  

Solutions to Avoid Late Reporting  

Avoiding late reporting can not only save your insured’s valuable assets, but it can also prevent them from alleging “You should have explained this to me” and filing an E&O claim against your agency.  

• Encourage your insured to review the relevant policy language as to what constitutes a claim and the requirements for noticing their carrier. The insured should have a firm understanding of their obligations under the policy before a potentially covered matter arises. It can help if you have a standard form letter where you can insert relevant claims reporting information upon policy issuance. Better yet, refer them to the application page number and request they review the wording and contact you if they have questions.  

• When a circumstance occurs that makes the insured aware of a situation that could give rise to a claim, encourage them to consult with your team on whether the insured should notify the carrier. In instances where an entity requests an insured not to disclose a government investigation such as a Federal Communications Commission (FCC) violation, strongly recommend your insured consult with their legal counsel on how to seek permission to properly disclose the investigation to their carrier.  

• Agents should always use the renewal process to inquire about any circumstances that may potentially evolve into a claim. Many carriers recommend starting this process by phone conversation rather than by email or letter. Written correspondence can create unfavorable results for both the agent/broker and the insured.  

• Notice all claims as defined in the policy and your agency contract with the carrier or wholesaler. Insured’s may believe notifying their carrier on what they think is a spurious claim may be harmful in procuring future insurance policies. While carriers will document these notices in the insured’s loss history, a report to the carrier, who can usually help the insured with advice, versus running the risk of a coverage denial due to untimely notice, is a much worse outcome. In fact, most insurers frame an insured’s proactive attitude in providing claims notice as a positive characteristic when marketing for liability coverage. Seeking advice shows the insured practices good risk management techniques. 

According to Fisher, claims-made and reported forms are increasingly complicated, and “It may be intentional as insurers try cover less and less.” There now can be as many as five requirements to trigger the policy even before the claim department begins looking at any other policy language such as the exclusions to determine their position. These five requirements follow, Fisher points out.  

1. The insured must first report the claim during the policy term or any applicable extended reporting provision. 

2. The alleged wrongful act(s) must be after any prior act/retroactive date.

3. The claim must not be prior or pending before a specified prior/pending date, also known as the “continuity” or “first coverage date.” 

4. The insured must report the claim to the company during the policy term (and as soon as practicable as stated in many conditions sections, or in essence, immediately and without delay). 

5. The claim cannot be related to any other previously reported claim to any prior insurer or under any prior policy if the insured has renewed with the same insurer. 

It’s Hard Out There for an Insurance Agent 

My parents were both independent agents, and in their 50 years, faced one notary-related E&O claim. It is different today. Whether you are insuring your best friend’s manufacturing empire or your neighbor’s home, there is little impetus today for aggrieved insureds not to file an E&O claim. “It’s just business, after all.”  

These tips can help you explain to your clients the dire consequences of late reporting on a claims-made and claims-made and reported policy forms. 

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