Completing the proof of loss is an important yet often overlooked part of the bond claims process. Following an investigation of the loss, the proof of loss affords the Insured the opportunity to tell the story of how the loss happened. We can think of the proof of loss as an opening statement; it’s an opportunity not only to plant the seed but also to convince the jury (the claim adjustor) that the loss occurred, is covered, and should be paid. If the proof of loss is poorly “plead” (e.g., it lacks specificity, or worse yet, misapplies language from the insurer’s own policy), getting the Insured’s loss paid can be delayed or even denied. Therefore, it is important that Willis Towers Watson is involved from the onset and reviews the proof of loss before it is submitted to the insurer. With this in mind, we are sharing some important tips to consider when preparing a proof of loss to best position you and your company for recovery.
Put simply, a proof of loss is a narrative outlining the events which gave rise to a loss. The proof of loss should not be confused with notice. Notice is simply providing the carrier with the basic information surrounding what you know about the claim at the time of discovery. The proof of loss, on the other hand, is the document provided to the Insurer after notice has been given and an investigation into the cause(s) of the loss has been conducted. The document must be dully sworn to and provide a detailed description of how the loss occurred including the who, what, where and when.
Ultimately, the proof of loss will be drafted by the Insured since it is the Insured that is most familiar with the narrative of the loss. However, the broker has a duty to provide guidance and review the proof of loss before it is submitted to the insurer, to ensure that it is properly prepared and provides the information that the insurer requires, at least to the extent that this is possible. A poorly prepared proof of loss can be the difference between what should be a clearly covered loss and one that is subject to dispute.
The language used in the proof of loss is important, especially since some terms that may be used in it may also be terms that are used in the policy. For example, if the facts that have given rise to a loss involves the use of a computer, we would want to ensure that the proof of loss includes language that closely mirrors the Computer Fraud language in the bond. As noted above, this is the insured’s first opportunity to make the argument in favor of the loss being covered. The facts will ultimately determine whether coverage exists, however, we don’t want to prejudice the client’s position by using wrong or inaccurate terms.
Equally as important is the tedious, but crucial documentation (“evidence”) that must be gathered. This documentation will not only substantiate the fact that a covered loss occurred but also provide support for the amount of loss being claimed. The nature of the claim and the span of time over which the loss took place could have a material impact on the amount of time it takes to complete a proper proof of loss.
A proof of loss should be carefully crafted by the insured, with the assistance of Willis Towers Watson. Most policies will provide the insured with ample time (six months from discovery is the standard in most bond forms) in which to provide the proof of loss. However, carriers recognize that investigations into how a fidelity loss occurred can be lengthy and may require additional time to complete. As a result, it is not unusual to request one or more extensions in which to provide the proof of loss while the insured conducts its investigation. However, insurers are not obligated to provide an extension, so insureds should keep this in mind and use its best efforts to meet the original deadline. As your broker and claims advocate, Willis Towers Watson will ensure that we are doing everything we can to protect your rights and interests should you notify us of a loss.
Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.
