While insurance policy language may vary somewhat, most, if not all will have provisions for the club (or an insured), as a condition precedent to the obligations of the insurer, to notify the insurer in writing of a claim made against an insured as soon as practicable after the insured’s HR manager, risk manager or general counsel (or equivalent position) first becomes aware of the claim.
It is essential for clubs to work with their own counsel when an incident arises, which may eventually lead to a claim as defined by the policy terms. The most common definition contained in the policy would read as follows:
- A written demand for monetary relief; or
2) A civil, criminal, regulatory or administrative proceeding for monetary or non-
monetary relief which is commenced by:
- service of a complaint or similar proceeding, or
- return of an indictment (in the case of a criminal proceeding), or
- receipt or filing of a notice of charges; or
3) An administrative or regulatory investigation by the Equal Employment Opportunity Commission, which is commenced by the filing of a notice of charges, service of a complaint, or similar document of which notice has been given to an insured.
While there is some subjectivity in what clubs may consider reporting to their insurance carrier and/or agent, the common theme of erring on the safe side versus being sorry at a later point is generally the appropriate route. However, any formal claim against the club that would fall within the policy definition must be reported to the carrier as soon as practicable after the club becomes aware of the claim. This is a standard condition of any D&O policy, which, if not followed, could result in the voiding of coverage by the carrier. In addition, it is a condition of the policy that the insured not admit or assume any liability, enter into any settlement agreement, or incur any defense costs without the prior written consent of the carrier.
Tom Walker is area executive vice president for RPS-Bollinger – Sports & Leisure. He has served on several club boards and committees, and is a recognized authority on club insurance issues. He can be reached at 800-446-5311 (ext. 8098) or [email protected]