By purchasing insurance from a variety of carriers, in a “stovepipe” fashion, insurance buyers can expose their firms to an uncovered loss and/or an overly complicated loss/claim scenario. Therefore, when analyzing your commercial insurance program, keep in mind the benefits of purchasing all of your insurance policies from the same carrier.
Frequently, a given company’s insurance program may look something like this:
Workers Compensation (WC), General Liability (GL), Property, Auto, and Umbrella from INSURANCE CARRIER 1…
Errors and Omissions (E&O) from INSURANCE CARRIER 2…
Directors & Officers (D&O) from INSURANCE CARRIER 3
Employment Practices Liability (EPL) from INSURANCE CARRIER 4, and so on….
Consider what may happen when a claim includes aspects covered by Insurance Carrier 1’s policy AND Insurance Carrier 2’s policy? For example, what if a claim included both bodily injury aspects (covered under GL) and financial harm aspects (covered under E&O)? Depending on the set of facts surrounding the claim, you could have a situation where Insurance Carrier 1 declines because of the Financial Harm aspects (which are excluded under their GL policy) and Insurance Carrier 2 declines because of the Bodily Injury aspects (which are excluded under their E&O policy). Another example would be a claim that included allegations covering both the Directors & Officers Liability policy and the Employment Practices Liability policy. Consider also a situation with an excess Umbrella from Carrier 5 on top of the entire program? Would coverage under the Umbrella be triggered? As you can see, the possibilities of ‘combined’ claims are extensive.
By purchasing different lines of coverage from the same insurance carrier, (without ‘stovepipes’), the claim will ‘fit’ somewhere within the various scopes of coverage of the policies issued by the single carrier. Similarly, the payment/processing of the claim should proceed in a more streamlined, timely, fashion since the single carrier will recognize that they will not have to ‘do battle’/negotiate with a competitor over the claim.
Of course, this premise must be compared to the potential costs savings and/or coverage enhancements that may be achieved through purchasing insurance policies from different carriers. Regardless of which approach is adopted, attention to this matter is warranted and advisable.
