Article 4 of 4: Navigating Policy Exclusions & Reporting Rules

An insurance policy is a legal contract with strict conditions precedent. Even with a valid policy, failing to report an incident properly or violating policy conditions can give the carrier legal grounds to deny coverage.

Common Policy Exclusions to Keep in Mind

Insurance policies are designed to cover unintentional errors and omissions—not every liability. Standard exclusions include:

• Intentional Fraud or Criminal Acts: Dishonest, fraudulent, or illegal acts are excluded.
• Contractual Liability: Guarantees or liabilities assumed under contract that go beyond standard common-law negligence.
• Insured vs. Insured: Claims brought by one partner, co-owner, or affiliated company against another under the same policy.
• Warranties & Guarantees: Express promises regarding future performance, durability, or outcome.

What Is (and Isn’t) a Claim?

Knowing when to notify your carrier starts with understanding what legally constitutes a claim:

• A Claim IS: A formal written demand for monetary damages, a served lawsuit, an arbitration demand, or a written request to toll a statute of limitations.
• A Claim IS NOT: Verbal complaints or angry phone calls. However, these are considered Potential Claims. Reporting potential claims in writing before your policy term ends ensures that if a formal lawsuit follows later, it will be covered.

The Three Golden Rules of Claim Reporting

1. Report Immediately: Notify your carrier in writing as soon as practicable when you receive a written demand or become aware of a potential claim.
2. Never Make Voluntary Payments: Do not admit fault, offer refunds, agree to settlements, or hire independent legal counsel without the carrier’s prior written consent. Out-of-pocket payments made without approval are generally non-reimbursable.
3. Satisfy All Operational Conditions: Check your policy for operational prerequisites. For example, many home inspection E&O policies require you to obtain a Signed Pre-Inspection Agreement prior to starting work as a condition precedent to coverage.

Key Takeaway

When in doubt, report. Promptly notifying your carrier of potential issues protects your rights and ensures your coverage remains intact when you need it.

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