Liability Claims
Takeaways December 2023
Welcome to the 36th edition of ‘Liability Claims Takeaways’ -
our monthly insights from industry stalwarts.
C O N T E N T:
Commercial General Multimedia Medical
Liability Insurance Liability Insurance Malpractice Insurance
W W W . P R U D E N T B R O K E R S . C O M
Commercial General Liability
A
Insurance Policy
What was the claim?
The insured manufactures tyres, distributed through retail partners in multiple
cities across India. As part of their operations, the insured installs and maintains
hoardings on the outlets of these retailers.
One of the hoardings, situated on the premises of a retail partner, caught fire due
to faulty electric wiring. This incident resulted in significant damage to the property
on the floor above the retailer’s premises, prompting third-party occupants to file a
substantial claim against the retailer. The retailer, in turn, demanded
compensation from the insured, who then reported it under their Commercial
General Liability Insurance policy (CGL policy).
Key aspects to remember:
1. Coverage is limited to claims arising from Due to compelling representations backed by
the business operations of the insured at factual evidence, the surveyor concurred with
the ‘designated premises’ only: this perspective, leading to the acceptance of
the claim under the insured’s CGL policy.
As the claim stemmed directly from the
hoarding installed as part of the insured’s 2. The absence of a contract for the use of
business operations, it was filed under the premises added complexity to the claim:
CGL policy. However, the insurer had imposed
Though there was an informal understanding
a ‘designated premises’ condition, limiting
between the insured and the retailer regarding
coverage to third-party bodily injury or property
the use of the premises, the absence of a
damage claims arising solely from the insured’s
written formal contract significantly
business operations at the specified
complicated the claim. Establishing a legal
premises – locations owned, used, or operated
relationship for the use, set up, and
by the insured in the course of their business.
maintenance of the hoarding between the
During the claim assessment, the surveyor insured and the retailer posed a challenge, as
construed the condition to mean that coverage there was no contract between them that the
extended solely to premises owned by the premises were being ‘used’ and ‘operated’ by
insured. Given that the hoarding was placed on the insured in the course of their business
the retailer’s premises, the surveyor concluded operations.
that the policy wouldn’t cover third-party claims
arising from the hoarding as it fell outside the
scope of the ‘designated premises’, leading to
the repudiation of the claim.
In this case, the ‘designated premises’
condition was interpreted to encompass
locations that were both ‘used’ and ‘operated’
by the insured, including the retailer’s
premises. Consequently, a representation was
submitted to the surveyor, contending that
restricting coverage solely to locations owned
by the insured would contradict the spirit and
intent of the policy.
Liability Claims Takeaways | December 2023
The surveyor was briefed and shown alternate Additionally, the insured was informed that not
evidence that all expenses related to setting all costs asserted by the third-party claimant
up and maintaining the hoarding were covered would fall under the coverage of the CGL
by the insured. Invoices supporting these policy. A clear distinction between covered
costs, along with email communications, were and excluded costs, accompanied by
provided to the surveyor. Additionally, the explanations, was presented to the insured.
electricity costs for running the hoarding were For instance, the third-party claim
compensated by the insured to the retailer encompassed a significant amount related to
through discounts on the retailer’s invoices. third party’s loss of income. The insured was
Given these details, it was clarified to the clarified that the CGL policy is designed to
surveyor that there existed an implied contract cover claims for property damage and bodily
between the insured and the retailer for the injury, and pure financial losses may not
‘use’ of the retailer’s premises. trigger the policy.
3. Arranging documentation from third-party It is imperative for the broker to conduct a
for assessment: comprehensive review of the insured’s
business operations during the placement
As the claim originated from a third-party with
process, gaining a thorough understanding of
whom the insured lacked a legal relationship,
the nature of various operations and
significant resistance was encountered from
incorporating essential covers into the policy.
the claimant in terms of sharing information.
The insured should openly communicate all
This not only caused delays in the assessment
aspects of their business operations, allowing
of the claim but also led to the surveyor
the broker to arrange the broadest possible
disallowing costs that lacked substantiating
coverage. Ideally, pertinent sections of
documents.
contracts with vendors, distributors, retailers,
Diligent efforts were undertaken to engage etc. should be shared with insurance brokers
with the third-party claimants, resulting in the for advice on necessary additional covers for
collection and submission of relevant purchase the insured and potential modifications to
invoices to the surveyor to substantiate their contracts.
incurred losses. In cases where invoices were
A deep understanding of the business also
unavailable, alternative documentation, such
equips the broker to navigate delicate
as freight-related documents and custom
relationships for the insured, mitigating
clearance documentation, was negotiated and
adverse reactions from crucial business
deemed acceptable for assessment by the
partners in the event of a claim.
surveyor.
Liability Claims Takeaways | December 2023
B Multimedia Liability Insurance Policy
What was the claim?
The insured, a prominent media company producing films and programs for popular
OTT platforms, faced a crisis just three days before launching a high-budget
program. They received 17 legal notices from various locations across the country,
all alleging defamation of certain castes/communities. The complainants also sought
injunctions against the program’s release. Urgently needing to address all
17 matters simultaneously, the insured promptly appointed multiple defence
counsels. The situation was swiftly communicated to their broker, who immediately
initiated the claim process under their multimedia policy.
Key aspects to remember:
1. Importance of adding crucial covers in the Moreover, as the insured promptly notified the
policy: broker, who then communicated the matter to
the insurer, the legal costs post the initial
A stay on the program’s release could have
emergent hearing were in alignment with and
resulted in substantial financial losses for the
approved by the insurer.
insured. Thus, it was imperative for the insured
to take swift legal action to ensure the program’s 3. Application of deductible:
timely release. With no time to wait for the
The insurer treated matters filed by different
insurer’s prior consent to appoint lawyers, the
communities as distinct incidents, leading to
emergency defence cost coverage within their
the claim being subject to 8 deductibles.
policy proved to be invaluable. This clause
However, the broker on behalf of the insured
allowed them to proceed with defending matters
argued that these matters should be treated as
without delay, easing the stress for the insured
a single event since they stemmed from the
during a critical situation.
same OTT program, all involving allegations of
2. Reasonability of defence costs: defamation against the insured. The concept
of ‘multiple related actions resulting in multiple
The insurance policy covers reasonable costs
claims deemed as a single claim’ was invoked.
incurred by the insured to defend a matter, with
the term ‘reasonable’ not explicitly defined. The Following extensive discussion and thorough
insurer typically considers factors such as submissions by the broker, the insurer
sensitivity, subject matter expertise, required accepted the notices as a single event and
experience, and surrounding circumstances applied only one deductible.
when approving lawyers. In this case, objections
were raised on the reasonability of emergency
defence costs. While the insurer generally allows
the appointment of one defence lawyer and
appearing counsel, the unique circumstances
here necessitated the urgent appointment of 17
different defence counsels. The broker
effectively argued that reasonability should be
interpreted in the context of each claim,
emphasising the potential for larger financial
losses if even one adverse court order occurred.
Given the cases arising in 17 different courts,
simultaneous appointment of 17 lawyers was
crucial for a successful defence.
Liability Claims Takeaways | December 2023
Medical Malpractices Insurance Policy
C
(Med-mal Policy)
What was the claim?
The insured, a prominent multispecialty hospital, received a legal notice from a
patient’s relative, alleging negligence during a Medical Termination of Pregnancy
(MTP) procedure that resulted in post-surgical sepsis. According to the
complainant, the patient had to undergo multiple surgeries post the MTP
procedure, experiencing severe mental, emotional, and physical trauma. Notably,
the hospital received this notice a day before the policy renewal, and the insured
was able to inform their broker only after the policy had been renewed.
Key aspects to remember:
1. Timely intimation of the claim:
As the policy in question operates on a
claims-made basis, it covers only those claims
reported within the policy period. Any claim that
should have been reported under the expiring
policy would not activate coverage under the
renewal policy. In this specific claim, the
insured had knowledge of the matter before the
renewal, obligating them to disclose it to the
insurer – an obligation inadvertently
overlooked.
These oversights could result in the insurer
rejecting the claim due to non-disclosure,
potentially rendering the renewed insurance
contract voidable at the insurer's discretion.
Hence it is of utmost importance for the insured
to diligently confirm with relevant stakeholders
the reporting of all such matters, particularly
during the renewal process.
Moreover, it is essential to train relevant
company employees to promptly report such
matters upon receipt to the risk manager,
general counsel, or their equivalent in the
hospital for timely reporting to the insurer.
2. Comprehensive Coverage:
The hospital’s coverage was adeptly
negotiated by the broker, who included a
‘continuous cover’ clause in the policy. This
clause allowed the insured to report any matter
that might have been inadvertently missed in
the prior policy period. Thanks to this provision,
the insurer did not allege non-disclosure, and
coverage was not denied to the insured.
Liability Claims Takeaways | December 2023
The landscape in India is evolving rapidly, and the insured, ensuring timely approval for
consumers are increasingly aware of their defence costs. The insured received regular
rights, not hesitating to seek compensation for reminders about policy’s terms and conditions
alleged negligence by service providers. With and was advised to operate within these
the growing complexity and the elevated risk boundaries to prevent any adverse impact on
of negative publicity, it’s crucial to align policy the claim.
covers with dynamic risk exposure. As
Due to publicity surrounding the matter, the
insurance brokers, Prudent assesses these
insured desired an early out-of-court
evolving risks and ensures customised
settlement. Recognising the sensitivity of the
solutions for the insured.
situation, the broker advocated with the
3. Insurer’s prior consent required for insurer to permit an out-of-court resolution.
out-of-court settlement: The presentation emphasised the cost-benefit
of settling, enabling the insured to be fully
The policy covers only those defence costs
discharged of liability without incurring
and compensation that are incurred by the
exorbitant defence costs due to prolonged
insured with the prior consent of the insurer.
legal proceedings. The insurer considered this
In this particular case, the broker maintained argument and granted approval for the
constant coordination between the insurer and out-of-court settlement.
Liability Claims Takeaways | December 2023
We are sure you found the anecdotes interesting and got some key points to take away.
Stay tuned for the next edition!
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Liability Claims Takeaways | December 2023
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