BASIC CLAIMS PROCEDURE
By Tarran Dookie
Notification of the Claim
The insured must inform the insurer of any event, which could give rise to a
claim. This must be done as soon as possible. Generally this would mean as
soon as is reasonably practicable. Insurers do not define what is ‘soon as
reasonably practicable’ and a claim denied on the grounds of being reported
too late, may ultimately end up in the courts unless resolved otherwise. The
wise approach is for the insured to report the claim in the earliest possible
Where the insured uses a broker, this information is given to the broker who
would pass on the information to the insurer and generally assist the insured
by negotiating and following up with the insurer.
Usually the insured is required to complete a claim form. This would include
matters such as date and time of loss, circumstances surrounding the loss,
statements from witnesses if relevant, and details of the loss suffered. Most
policies have a prescribed time (usually 30 days) within which details of the
claims must be submitted. If more time is needed, a written request should
must be made.
With respect to liability policies (e.g. public liability, products liability and
workmen’s compensation) it is important that the insurer be informed of any
event likely to give rise to a claim. There have been many cases of persons
who suffered a seemingly minor injury that later turned out into a major
claim. All incidents must be reported even if they appear to be insignificant.
Investigation and payment
The insurer may investigate the claim by using their own in-house personnel
or appoint independent loss adjusters. The insurer will ensure that:
a. Cover was in force at the time of the loss.
b. The peril or contingency is covered by the policy.
c. Reasonable steps were taken to minimize the loss.
d. Conditions have been complied with.
e. No exceptions are appropriate.
f. The insured’s estimate of the loss is reasonable.
Minimising the loss
It is a policy condition that upon the occurrence of an event that causes a
loss that is covered under the policy, the insured takes all reasonable steps to
minimise the loss, and prevent further damage or worsening of the situation.
In other words, the insured must act as if he was uninsured. The
insurer/adjuster should be kept informed of the situation.
These may be are made where there is no legal obligation on the insurer to
pay. The loss may not be covered under the policy. While ex-gratia
payments may sometimes be made out of sympathy, more often they are
made upon commercial considerations (the customer has a considerable
amount of business with the insurer or the customer’s broker makes out a
case on behalf of his client).
Resolution of disputes
Disputes may relate to whether or not the insurer is liable (a dispute as to
liability) or the amount payable by the insurer ( a dispute as to quantum).
Disputes may be resolved by one of the following methods:
This is the preferred method. The matter is discussed and perhaps after
compromises, an amicable settlement or conclusion is reached.
The arbitration condition on policies may stipulate that the dispute be
referred to an arbitrator or arbitrators. Some policies (particularly motor and
liability) stipulate that all disputes must be referred to arbitration, whereas
other policies state that only disputes as to quantum must be referred to
arbitration. The insured is not free to disregard arbitration and adopt
litigation. The insured can still take the matter to Court if dissatisfied with the arbitration award but a
judge would not set aside an arbitration award without good reason.
(Arbitration is usually speedier and less costly than litigation.)
Where the parties cannot negotiate a settlement and arbitration is
unsatisfactory or inconclusive, the matter may end up in the Courts.
Litigation can be costly and time-consuming and should only be treated as a
4. Alternative dispute resolution
This is a rather recent development that is growing in importance. It is
similar to arbitration but it is voluntary. A resolution or settlement is not
imposed but rather it is suggested by the third party chosen to intervene.