The COVID-19 pandemic created or elevated in importance many business practices that enabled us to adapt in a vastly different working world. Many make good business sense in any situation and any market conditions.
That includes a variety of risk management process recommendations that were made to help keep things moving in the pandemic work environment. As we emerge from COVID-19 it’s logical that they continue to help risk managers better manage their total cost of risk, especially in the challenging hard market:
1. Allow More Time for all Insurance Processes
The recommendation to complete renewal programs early, get coverage bound early, and finalize formal documentation early was made to counter slower processing times, but should be followed under any situation and market condition. We expected processes to take longer than usual during COVID-19 due to remote working conditions and the increased volume of insurance transactions and inquiries. Never wait until the last minute, as the volume of insurance transactions and inquiries sent to carriers remains high.
2. Proactively Communicate Your Story
Many management liability insurers continue to request COVID-19-related underwriting questions to evaluate its impact. Continue to work with your broker to strategize the most effective approach to articulating your key pandemic-related risk factors and mitigating considerations, and to further paint a strong picture of your program and your organization to position your company for the most favorable terms possible with your carrier.
3. Obtain Written Documentation of Key Items
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. Especially during firming market conditions, it can be tempting to pursue a “soft” (i.e., not formally documented) extension to allow more time to obtain alternatives. Avoid this approach, as it creates significant coverage uncertainty.
4. Recognize the Value of Certainty
In challenging and uncertain times, there is value in certainty. When considering insurance, certainty can take the form of continuity, the time period of coverage, and “locking in” coverage as early as possible. While many programs will be marketed, and insureds will consider changing insurers due to firming market conditions, special consideration should also be given to continuity of coverage and relationship with a carrier, if possible. In management liability claims, there is a strong likelihood that alleged wrongful acts span multiple policy periods, which creates uncertainty regarding the appropriate policy period for coverage and highlights the advantage of maintaining continuity with an incumbent carrier.
5. Remit Premium Payments Early
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. Delays are always possible, under any conditions -- it is always 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 non-payment of premium.
6. Clear Subjectivities Early
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 timeframe (i.e., 14 days) post-inception.
7. Submit Timely Notice of Claims
Management liability policies often are claims-made and reported policies (US), and timely notice of claims is paramount to realizing insurance coverage. With many businesses still operating remotely, it remains important 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.
8. Evaluate Notice of Circumstance Policy Conditions
In any environment, matters can rise to a threshold that is not a claim as defined in the policy yet may give rise to a claim. Especially in situations where renewal terms and coverage may be more restrictive than the prior management liability program, insureds may wish to evaluate whether a notice of circumstance is appropriate. Submitting a notice of circumstance may serve to preserve coverage under the existing program for the circumstance submitted. Note, the threshold to submit a notice of circumstance can be somewhat burdensome. There is no guarantee 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.