Insurance claims can be repudiated for many varying reasons – from the most obvious to the least expected reasons. One of the best ways of trying to avoid an insurance repudiation is to understand your contractual duties stemming from your policy. Although this does not guarantee a payout, it does, nonetheless, enhance one's chances of succeeding in a claim. In liability insurance policies (mainly), there is almost always a "notification clause" which requires that an insured notifies the insurer of any event/occurrence that may potentially lead to/attract liability. The significance of these clauses is explicated below. Additionally, most insurance policies require the insureds to report/submit an insurance claim within a certain number of days. Failure to adhere to these requirements may result in a rejection of an otherwise valid claim. It is thus worth delving into the legalities of these clauses.
Duty to notify the insurer:
As stated above, most insurance policies do contain clauses which require insureds to notify insurers of any occurrence that may result in liability. Such clauses form part of the terms and conditions of an insurance contract and are therefore binding. The courts have long recognised the significance of such clauses for insurers – see Norris v Legal & General Assurance Society Ltd. The notification clause requires you, the insured, to notify the insurer, as soon as practicably possible, of any event/occurrence that may result in a claim. Notifying an insurer timeously is advantageous to the concerned insurer – this is because it places an insurer in a position where it can mitigate the losses; make assessments; commence with investigations, etc. Failure by an insured to adhere to such a contractual term may cause serious prejudice to the insurer. A breach of such a clause may allow an insurer to repudiate a valid claim. Whilst this requirement may seem simple on face value, in practice, it does come with certain challenges. For example, an insured may be uncertain as to whether the incident is significant enough to warrant notifying an insurer; there may be circumstances that disallow immediate reporting; etc. The courts have held that the test to be applied when dealing with such clauses is an objective test – it goes about reasonableness (which would involve investigating the prevailing circumstances at the relevant time). A prudent approach by insureds when faced with doubt and uncertainty is to seek clarification from either their insurer and/or broker.
Reporting/submitting their claim timeously:
It is also normal to find a requirement in short-term insurance policies, and more so liability policies, that a claim should be reported or submitted "as soon as practicably possible" or within a certain number of days. Like "notification clauses", these clauses benefit insurers for the reasons explicated above. Again, failure to report or submit your claim within a specified period may prejudice the claim. Where there are sound grounds for non-adherence, however, an insurer (or a presiding officer, if applicable) may condone non-adherence. This would, among other things, be in line with the "treating customers fairly" principles.
It is crucial to understand and adhere to policy requirements. When in doubt, insureds should seek clarification from their insurer or broker. Importantly, if a claim has been rejected, insureds should also seek legal advice regarding the lawfulness of the rejection.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.