Risk Insider: Brian McDonald

Navigating Disclosure Requirements When Applying for Insurance

By: | January 9, 2017 • 2 min read
Brian McDonald, a partner at Jones Day, represents policyholders in major coverage disputes and has helped clients secure hundreds of millions of dollars in insurance recoveries for extraordinary losses. He also advises clients on the design, negotiation and purchase of insurance programs.

Applying for liability insurance can be a time-consuming and tedious task for even the most experienced of policyholders. Insurance applications and related submissions should be carefully completed lest an inadvertent mistake or omission encourage insurers to deny coverage later.

One potential pitfall in the application process relates to disclosure of potential claims that might arise in the future.

For example, certain insurance applications may ask if the policyholder has “knowledge or information of any act, error or omission which might reasonably be expected to give rise to a claim?” If yes, the application often requests disclosure of that information as part of the application.

Similarly, under certain circumstances, an insurer might ask the policyholder to sign a “warranty letter” that includes language such as the following: “No Proposed Insured has knowledge of any act, error, omission or circumstance which would lead a reasonable person to suspect that such Potential Exposure might give rise to a Claim under the Proposed Coverage, except as detailed in the attached.”

The risk with these types of requests is that they are inherently vague and ambiguous. Theoretically, any act, error, omission or circumstance “might give rise to a claim” over time. This vagueness leaves the policyholder without clear guidance as to what information the policyholder should disclose.

Further, the policyholder’s decision whether or not to disclose certain information may impact coverage for future claims. If certain facts are disclosed, the insurer might add an endorsement to the policy expressly excluding coverage for any claim related to the disclosed information.

The risk with these types of requests is that they are inherently vague and ambiguous. Theoretically, any act, error, omission or circumstance “might give rise to a claim” over time.

On the other hand, if the relevant facts are not disclosed, and a claim eventually arises that is related to those facts, the insurer may argue that the policyholder failed to disclose material facts in applying for the policy and therefore forfeits coverage for any claim related to those facts.

Even worse, the insurer may contend that the failure to disclose warrants the loss of coverage for any claim under the policy — whether or not tied to the non-disclosed facts — for any policyholder with knowledge of those facts.


In light of these perils, what is a prospective policyholder to do? Policyholders can employ several strategies to help minimize the risk of losing coverage:

  • Review all insurance applications carefully to understand the scope of the information requested. Ask your insurance broker if they have other applications that use more precise wording.
  • If the insurer requests that you sign a warranty letter, consult with your broker or coverage counsel about negotiating the specific terms of that letter. Consider proposing more precise language that provides a clearer disclosure obligation (e.g., disclosure of facts the policyholder “believes will give rise to a claim in the future.”)
  • Once the language of the final application and any warranty letter is confirmed, consult with counsel to identify known and unknown claims and consider what information needs to be disclosed during the application process.

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

The risk manager for Boyd Gaming Corp. says curiosity keeps him engaged, and continual education will be the key to managing emerging risks.
By: | May 1, 2018 • 4 min read

R&I: What was your first job?

I was trained as an accountant, worked in public accounting and became a CPA. Being comfortable with numbers is helpful in my current role, and obviously, the language of business is financial statements, so it helps.

R&I: How did you come to work in risk management?

Working in finance in the corporate environment included the review of budgets and the analysis of business expenses. I quickly found the area of benefits and insurance — and how “accepting risk” impacted those expenses — to be fascinating. I asked a lot of questions. Be careful what you ask for — I soon found myself responsible for those insurance areas and haven’t looked back!

R&I: What is the risk management community doing right?


I have found the risk management community to be a close-knit group, whether that’s industry professionals, risk managers with other companies or support organizations like RIMS and other regional groups. The expertise of the carriers and specialty vendors to develop new products and programs, along with the appropriate education, will continue to be of key importance to companies going forward.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

As I’m sure many in the insurance field would agree, Hurricanes Katrina and Rita in 2005 changed our world and our industry. It was a particularly intense time and certainly a baptism by fire for people like me who were relatively new to the industry. This event clearly accelerated the switch to the acceptance of more risk, which impacted mitigation strategies and programs.

Bob Berglund, vice president, benefits and insurance, Boyd Gaming Corp.

R&I: What emerging commercial risk most concerns you?

The fast-paced threat that cyber security represents today. Our company, like so many companies, is reliant upon computers, software and IT expertise in our everyday existence. This new risk has forged an even stronger relationship between risk management and our IT department as we work together to address this growing threat.

Additionally, the shooting event in Las Vegas in 2017 will have an enduring impact on firms that host large gatherings and arena-style events all over the world, and our company is no exception.

R&I: What insurance carrier do you have the highest opinion of?


With the various types of insurance programs we employ, I have been fortunate to work with most of the large national and international carriers — all of whom employ talented people with a vast array of resources.

R&I:  How much business do you do direct versus going through a broker?

We use brokers for many of our professional coverages, such as property, casualty, D&O and cyber. We are self-insured under our health plans, with close to 25,000 members. We tend to manage those programs internally and utilize direct relationships with carriers and specialty vendors to tailor a plan that works best for team members.

R&I: Who is your mentor and why?

I have been fortunate to have worked alongside some smart and insightful people during my career. A key piece of advice, said in many different ways, has served me well. Simply stated: “Seek to understand before being understood.”

What this has meant to me is try everything you can to learn about something, new or old. After you have gained this knowledge, you can begin to access and maybe suggest changes or adjustments. Being curious has always been a personal enjoyment for me in business, and I have found people are more than willing to lend a hand, offer information and advice — you just need to ask. Building those alliances and foundations of knowledge on a subject matter makes tackling the future more exciting and fruitful.

R&I: What have you accomplished that you are proudest of?

Our benefit health plan is much more than handing out an insurance card at the beginning of the year. We encourage our team members and their families to learn about their personal health, get engaged in a variety of health and wellness programs and try to live life in the healthiest possible way. The result of that is literally hundreds of testimonials from our members every year on how they have lost weight, changed their lifestyle and gotten off medications. It is extremely rewarding and is a testament to [our] close-knit corporate culture.

R&I: What’s the best restaurant you’ve ever eaten at?


Some will remember the volcano eruption in Iceland in spring of 2010. I was just finishing a week of meetings in London with Lloyd’s syndicates related to our property insurance placement when the airspace in England and most of northern Europe was shut down — no airplanes in or out! Flights were ultimately canceled for the following five days. Therefore, with a few other stranded visitors like myself, we experimented and tried out new restaurants every day until we could leave. It was a very interesting time!

R&I: What is the riskiest activity you ever engaged in?

I am originally from Canada, and I played ice hockey from the time I was four years old up until quite recently. Too many surgeries sadly forced my recent retirement.

R&I: What do your friends and family think you do?

That’s a funny one … I am a CPA working in the casino industry, doing insurance and risk management, so neighbors and acquaintances think I either do tax returns or they think I’m a blackjack dealer at the casino!

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]