While you may see that the payment of premiums every year means that your insurance policy is a liability on your book, the reverse is actually true: It’s a valuable asset.
The national law firm of Anderson Kill recommends in a recent blog that companies treat their policies as assets that must actively managed if their full value can be realized when they are needed. It recommends the following steps for maximizing the value of your insurance policy:
- Save your policies – Make sure that your insurance policies and accompanying documentation are retained.
If you are going through a housekeeping and are mulling 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 loss that occurs in the future 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 the 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’ll be able to identify any problems.
At this point it is usually not too late to get any problems corrected. 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 the 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 try to assess which of your policies would respond. And if you find that a policy could be tapped for a claim or a loss, you need to file a claim or notify your insurer of a potential claim.
This is important in order to comply with 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. And don’t wait just because you are concerned that your carrier will raise your rates next time upon renewal.
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 an 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.
- Additional insured? Ask for policy copy – If your company is named as an additional insured on another company’s policy, you should obtain a copy of the policy and not just a certificate. You should request a copy of the policy, as it will show that you are truly named on the policy and that the policy exists.
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 prepared to handle any issues should a loss or a claim arise. With the policy in hand, 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.