A 5-Step Action Plan for Diffusing Claims

By Lisa Scoble posted 04-03-2017 08:58 AM



Your last appointment ran way over. You sprint through the office door, and a client gives you a cold glare from the comfort of her lounge chair. Her look says, "It's about time. You're 45 minutes late."

As you throw drawers open and toss file folders on your desk, you apologize profusely while preparing the next transaction.

This hectic mindset invites mistakes. If you prepare for inevitable mishaps, however, you put your firm and your career in a position to keep going strong. Read on and learn what preemptive measures to take before a customer files a claim against you, and see what steps to follow when you receive notice of a claim.


Step 1: Identifying a Claim

To ensure coverage under certain errors and omissions (E&O) policies, you need to recognize situations in the following categories:

  1. You come across an error in your work and think it might cause a problem or lead to a lawsuit. This situation is referred to as an incident.
  2. You receive notification of someone planning to sue you for damages you have allegedly caused. This situation is referred to as a claim.


Step 2: Notify Your Insurance Company

Once you’re involved in a claim situation, you must give immediate written notice to your insurance company. This holds true for claims and incidents. Failing to report the latter could jeopardize your coverage for claims that may arise from this incident in the future.

To notify your insurance company of a claim or incident, simply fill out the claim report attached to your policy. You can also request a claim report from your insurance representative. Once completed, send your claim form, including all demands, suits, or other papers, to the address listed on the report.

If you are unsure if you should report a situation as a claim, contact your insurance company’s claims department. A representative will work with you to determine your best options.


Step 3: Gather Important Information

If you are reporting an incident or claim, the following information should be available:

  • Listing agreement
  • Sales contract
  • Closing documents
  • Any correspondence, notes, and phone messages related to the incident or claim
  • Copies of written and oral side agreements with the claimant or codefendant

Include the above information in a file for use by the claims department and its representatives, should it become necessary.

All parties involved with the claim or incident should prepare a chronological history of their participation in and understanding of the activities surrounding the event in question.


Step 4: Protect Yourself

To protect yourself, do not discuss the matter with anyone other than representatives of your insurer. Do not produce any of the incident records for inspection without clearance or approval from the insurer.


Step 5: Await Further Direction

Your insurance company will retain appropriate counsel and communicate with the named insured for all information regarding the claim or incident.

Claims cause stress, but you can avoid unnecessary risk by following these five steps. If you think a transaction could go wrong, reach out to your insurance company’s claims department. Rely on them to answer your questions and assist you every step of the way.

This article is for general information purposes only, and it was produced in conjunction with XL Catlin.