Liability insurance, conceptually, provides a means to mitigate a host of risks: auto crash, theft, fire, flood, business loss, and so forth. Most people will be compelled to buy liability insurance at some point; some people will buy a lot of it. If you don’t pay your premiums, you lose coverage. Sure. That is clear. What many consumers do not always appreciate, however, are the myriad other ways you can lose or be even denied coverage.

Trying to keep your insurance premium from increasing if you report a claim? That decision could end up being even more costly.

Insurance policies typically contain specific grounds for denial of coverage. Often overlooked is denial of a claim because of an insured’s failure to comply with the contractually imposed duty to timely notify the company of a potential claim.

The duty to notify an insurer about a claim can be clear in the event of, say, a car crash on the highway, or tree falling on one’s home. Easy. Of course, one should notify one’s insurer and take appropriate steps to get the claim processed and paid. But not all claims are this straightforward or even likely to result in a claim. What happens then? When does an “event” become something worthy of reporting it to your insurance company?

Consider, for example, someone suffers a minor injury on your property. Or your dog nips someone without leaving any visible sign of injury.

Insurers have done a thorough job of making policyholders scared to death of reporting anything for fear that premiums will increase. At the same time, failure to promptly report a potential claim could result in denial of coverage.

Deciding whether to report a claim sometimes requires more careful consideration.

Our courts have ruled that notice must be provided to an insurer within a “reasonable” time under the circumstances. What is more, notice must be provided for any incident that would make an ordinary person believe there may be liability for a claim for damages. As the courts have put it, “injury, however slight, received from an accident within the coverage of a liability policy … probably will, result in a claim for damages.”

In other words, for any apparent non-trivial injury potentially covered by insurance, there will likely be a claim for damages.

Even in the face of this guidance, there may be ambiguity. Start with the policy language. That may give specific enough instructions and direction. Most insurance policies will spell out when, and how a claim should be reported. If the policy language does not give clear enough guidance under your unique circumstances, you may wish to consult with an attorney.

Aside from judicial guidance and policy language, it never hurts to step back and consider the broader implications of these guidelines. Use that broader construct to help you make the best decision. In other words, consider why in the first place there is even a duty to timely report a claim or potential claim. A delay in reporting certain events might prejudice your insurance company from mounting an appropriate defense or conducting a necessary investigation. If this looks like something that would be risked by delaying the reporting of your claim, you may resolve that it would be better to be safe than sorry.

It is better to be safe than sorry: report the claim. If your carrier, ultimately, does not have to pay out, it is unlikely your premiums would be affected. If it is a valid claim and payment is required, then it was the right thing to report the claim. After all, that is why you have insurance in the first place.

Attorney John M. Parese is a partner at the New Haven-based firm of Buckley Wynne & Parese. He can be reached at 203-776-2278 or [email protected].

This article was featured in the following news publications:

• The New Haven Register
• Connecticut Post
• The Hour
• Stamford Advocate
• Greenwich Time
• News Times
• the Middletown Press
• The Register Citizen