Test_8 Management Liability Best Practices_1.4.22
The hard insurance market and COVID-19 combined to create or elevate many risk management practices that continue to make good business sense in any situation and market condition.
As we move through 2022 and beyond, it’s logical that these eight management liability methods continue, which will help risk managers take control of their risk, especially as the challenging hard market lingers:
The recommendation to complete renewal programs, get coverage bound, and finalize formal documentation early was made to counter slower processing times, but should be followed under any situation and market condition. Never wait until the last minute, as the volume of insurance transactions and inquiries sent to carriers remains high.
Continue to work with your broker to strategize the most effective approach to articulating your key risk factors and mitigating considerations to your carrier, and to further paint a strong picture of your program and your organization to position your company for the most favorable terms possible.
Undocumented, verbal, and informal commitments from carriers can create opportunity for uncertainty, confusion, and ambiguity. As always, written documentation with respect to all aspects of insurance coverage via a formal quote, binder, and policy is a must.
Due to continued firm marketing conditions, many programs will be marketed, and insureds will consider changing insurers; however, special consideration should also be given to continuity of coverage and relationship with a carrier, if possible. Management liability claims that allege wrongful acts can span multiple policy periods, creating uncertainty regarding the appropriate policy period for coverage, highlighting the advantage of maintaining continuity with an incumbent carrier.
The possibility for delays in premium payments was anticipated during COVID-19, and those delays could still occur from the insured, carrier, or banking/processing systems. It remains a good practice to remit premium payment early to allow as much time as possible for receipt by the insurer to avoid cancellation of the policy due to nonpayment of premium.
Addressing subjectivities prior to binding has always been a key recommendation, and it is still critical to satisfy subjectivities referenced on quotes early, and most preferably prior to binding coverage. Leaving subjectivities outstanding creates the potential for significant coverage gaps, as binders often expire if subjectivities are not addressed within a relatively short time frame (i.e., 14 days) post-inception.
Management liability policies are often claims-made and reported policies (U.S.), making timely notice of claims paramount. It remains good business practice to poll internally for potential claims to be noticed for all claims-made and reported management liability policies. Key internal stakeholders should be aware of reporting requirements and what constitutes a claim, and risk managers and general counsels must be diligent in ensuring those matters are noticed timely.
Matters can rise to a threshold that is not a claim as defined in the policy yet may give rise to a claim, and insureds may wish to evaluate whether a notice of circumstance is appropriate, especially when dealing with an expiring claims-made policy. Submitting a notice of circumstance may preserve coverage under the existing program for the circumstance submitted. There is no guarantee, however, of future coverage as each situation is highly dependent on the specific facts at hand, and certain downsides can exist relative to a notice of circumstance.
In any market and in any situation, never lose sight of the management liability insurance best practices required to maximize the potential for a successful program renewal or claim submission.