Even though your insurance premium payments appear on your books as an expense, you are in fact purchasing a valuable asset.
The law firm of Anderson Kill recommends in a blog that companies treat their policies as assets that must be actively managed if their full value is to be realized when they are needed.
It recommends the following steps for maximizing the value of your insurance policies:
Save your policies – Make sure that you retain your insurance policies and accompanying documentation. If you are considering destroying an old policy, make sure first to review your activities and the policy to make sure you may not need it to respond to a future loss or a new claim that dates back to the time the policy was in effect.
New claims that are related to others made during the policy period can also arise, as can claims that arise out of circumstances that were reported during the policy period.
Be smart about how you organize your old policies. If you have multiple lines of coverage, you may want to consider using a spreadsheet to keep them organized.
Review new policies immediately – Once you receive a new policy, make sure that it matches the certificate and/or your correspondence with your broker or carrier. If you review the policies upon receipt, you can identify any potential problems. At this point it is usually not too late to get any issues fixed. Wait too long and that may not be the case.
If you do find any discrepancies, your insurer may be able to issue a revision, endorsement or clarification. If they don’t, at least you’ll be on record disputing a portion of the policy and you’ll have proof you did not waive anything.
Review coverage after every loss – Whenever you are faced with a potential loss, you should immediately assess which of your policies would respond. You can call us for assistance if needed.
And if you think that a policy or policies may cover a potential loss, notify your insurance carrier promptly. This is important so that you are abiding by your policy’s “timely notice provisions” requiring that you give notice within a certain period of time once you become aware of a potential loss or liability.
Don’t let the matter languish until it becomes a full-fledged claim or wait to see if another party will pursue payment for an alleged liability.
This strategy will work in your favor. If you eventually decide to handle it on your own and not file a claim, there has been no harm for you or the insurer. However, if you fail to file the claim in the required period of time, you could well be setting yourself up for forfeiture of the claim. And if you do wait and the insurer disputes the claim, you could be in for a long and costly legal battle.
Mergers, spin-offs and acquisitions – If you are going through a merger or acquisition, you need to pay special attention to insurance issues. It may not always be easy to transfer insurance assets that cover both a division that’s being spun off and other parts of the operations.
While it’s desirable that insurance for a covered unit be transferred with the sale, this is not always possible, particularly if the insurance company decides not to approve the transfer. If it refuses, you may have to consider other means of transferring risk.
Call us if this is the case.
Additional insured? Ask for policy copy – If your company is named as an additional insured on another company’s policy, ask the other firm for a copy of the policy, and not just a certificate.
Once you obtain the policy, you can then review it to make sure that your company was properly added as insured.
Also, if you have a copy of the policy in hand, you’ll be better able to respond should a loss or a claim arise. You will know where and how to give notice, what coverage is available, what exclusions might apply, what other conditions might apply, and how deductibles, retentions and limits of insurance are allocated and calculated.
Conversely, if you don’t have a copy of the policy, you have effectively ceded all of the control over the loss and claims-making process to your contractual partner.
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