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

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.


That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.


Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]