Every year, billions of rand are paid by insurers to cover legitimate claims; but recent global events show that risks continue to evolve, often testing insurance policy responses against factual scenarios that are uncharted territory for both insurer and policyholder.
Rising claims frequencies and values
Recent market trends indicate an increasingly challenging landscape in respect of liability issues and claims.
The SHA Annual Specialist Risk Review 2020, revealed that the average quantum of a liability claims rose significantly in a short space of time and continues in an upward trajectory. Further, the frequency of claims intimations and settlement values has increased exponentially. The rise in both frequency of claims and settlement values is attributed to increased litigious behaviour, claims inflation, tougher economic environment and general in risk exposure.
Businesses in general are more likely to deal with complex liability issues than ever before, with the risk of media involvement adding to the complexity in these sensitive situations. The complexities in this space place a reciprocal duty on insurers to actively review claims, while providing products that absorb the risks posed by a challenging environment.
SHA recently dealt with a claim involving an insured in the property sector. A third party had sustained an injury on the insured’s premises as a result of an incident involving a ride-on motorized cleaning machine. The premises where the incident occurred raised various complications in relation to management and ownership structures as well as outsourced services. There was also a threat of negative media coverage in the event the claim was not handled with the urgency and sensitivity it demanded.
Fortunately, the claim was notified almost immediately, and urgent action was taken by the insurer to investigate the incident and any potential policy issues. The insurer was able to trace all the terms of engagement that regulated the various relationships tied to the event. In conclusion, an agile strategy was adopted towards resolving the claim and dealing with any and all potential risks posed.
Timely notification of loss event
In addition to highlighting the importance of clear liability and indemnity clauses in commercial agreements, the above scenario offers important lessons in managing complex and technical liability issues. Firstly, it shows how a collaborative effort between insurers and policyholders can assist to avoid or overcome issues. It also shows that early notification allows for a concerted and proactive approach in dealing with complex issues, allowing for the resolution of any coverage issue while possibly containing the extent of damage.
An interpretation of any insurance policy wording will reveal that insurers generally want to be kept in the know of any risks posed and events that may lead to a claim in terms of the policy. Timeous and early notification to the insurer becomes essential in determining coverage, mitigating loss and managing any technical and complex issues that may be posed by a potential claim.
One of the main benefits of an insurer is its experience in dealing with claims, as well as the institutionalised knowledge when it comes to uncharted waters. An insurer is likely to be supportive and proactive in proposing steps for managing the claim more effectively. Insurers also have some suggestions of their own in light of what has worked or failed in the past.
Considering differing interpretations
A central issue in many insurance coverage disputes is the interpretation of insurance policy language, and the application of the language to an insured’s underlying claims or losses. It is important for the insured to understand exactly what product has been purchased to minimise any future potential issues of this nature. Knowledge of the business and business environment are also vital to identify cover that would ensure continuity of the insured’s business.
Communicating with the insurer from the onset allows for any coverage issues to be dealt with as soon as possible. There is always a risk of insurance claims evolving into protracted, multi-party disputes that sometimes involve parallel actions in more than one forum. A solid relationship with the insurer benefits the insured.
Loyiso Yako
Claims Specialist (Liability) | Professional Indemnity & Liability Claims