Any time you have a business personal property policy in place which covers property of any kind, it is essential to have good documentation of what you have. It is also critical that your insurance policies are covering the right amount of property and type of property the way you want it covered.
It is too easy when you get around to your year end renewal on your business owners package (If it has the Tools & Equipment Coverage or BPP Coverage on it) or your Inland Marine or Property policies, to just renew and not take a close look at what is actually covered.
I have worked with several companies, which, when we reviewed their tools and equipment or Business Personal Property coverage of their prior policies, the limits were not at where they needed to be. This happens for a variety of reasons. I have seen some companies who see a lot of growth in their first few years in business. After a year or two goes by, they don’t realize how much stuff they have accumulated, which ends up being worth a lot of money but not covered by their policy. So this is something we try to stress when you get your first policy, however it is something to make sure is updated as your company grows as well.
Claims made General Liability (GL) Policies cover claims that arise from injury or damage occurring during the policy period and reported to the insurer during the policy period. Claims arising from events outside the policy period or claims reported to the insurer outside the policy period are not covered unless special coverage is purchased or arranged with the insurer. This is done by purchasing a tail for a specified extended reporting period.
Generally once you have a claims made policy, its best to either keep going on with claims made policies. If you were to switch to an Occurrence Policy, this could leave a potential hole in covering claims if they were to arise. Most of the time a claims made policy will be less expensive at the beginning. If you have to purchase an extended reporting tail these can at times be just as expensive as the original policy themselves.
Here is a quick example of how they work both good and bad:
You own a Convenience Store and you have just finished up mopping the inside. A customer comes in and slips and falls. They get up and seem to be ok. You check on them and they tell you everything is fine so they leave and you think nothing else of it. Your claims made policy expires the next month and you switch to an occurrence policy. All of a sudden, 2 months later you hear from the person that slipped inside your store, and they are claiming a back strain due to the fall. They state that it has effected their work performance, life etc.
Since the claim has now been filed outside of the policy period and you have switched to an occurrence policy, you are now exposed to not having coverage for the claim. If you did not purchase extended reporting period or tail coverage, then, you will potentially not have coverage for the claim. If you decided to purchase the extended reporting period coverage, then you should be fine and the insurance carrier will cover the claim. It’s always important to discuss what type of general liability coverage is best for your company with your agent, not only in the short term but the long term as well.