Typically, design professionals’ errors and omissions insurance policies are claims-made and reported or claims-made policies. These policies, unlike traditional occurrence policies, provide coverage for claims made and reported during a predetermined period of time. With a claims-made policy, the making of a claim is the condition precedent to coverage under the policy. Claims-made policies provide more certainty to the insurer which translates into lower premiums for the insured.
Recently, the Colorado Supreme Court addressed a question of first impression regarding untimely notice under claims-made policies in Craft v. Phila. Indem. Ins. Co., 343 P.3d 951, 955 (Colo. 2015). Although Craft did not involve design professionals or their insurance policies, the holding is broad enough that it will be applied to design professionals and their insurance policies. The Court concluded the notice rule applies to untimely notice under claims-made policies. Following this ruling, insurers are not required to prove they were prejudiced by untimely notice of claim. Instead, an insurer can deny coverage if a claim is made or reported one day outside the policy period.
Practically, timely reporting of claims and potential claims is important regardless of the type of policy involved. Following Craft, it is even more important that design professionals timely report claims and potential claims. If a claim is not timely reported there is a risk it could fall outside the policy period resulting in loss of coverage that otherwise would have existed if the claim was timely reported.