Claims procedure: Overview, definition, and example
What is a claims procedure?
A claims procedure is a defined process that outlines the steps a party must take to file, process, and resolve a claim under a contract or insurance policy. The procedure typically includes instructions on how to notify the other party of the claim, what documentation is required, the timeframes for submission, and how disputes related to the claim will be handled. The goal of the claims procedure is to ensure that claims are handled efficiently, consistently, and in a way that complies with the terms of the agreement or policy.
For example, in an insurance policy, the claims procedure might involve notifying the insurer within a certain number of days after an incident occurs and submitting relevant evidence of the loss.
Why is a claims procedure important?
A claims procedure is important because it provides a clear framework for both parties to follow when a dispute or issue arises that requires resolution. It helps prevent delays, misunderstandings, and disputes over how a claim should be handled. Having a clear process in place ensures transparency, sets expectations, and provides a fair way to address claims.
For businesses, a claims procedure ensures that claims are processed efficiently and that legal or financial obligations are met. For individuals or other parties, it ensures they know how to properly submit claims and what to expect during the resolution process.
Understanding claims procedure through an example
Imagine a business enters into a contract with a supplier, and the supplier fails to meet its delivery deadline. The contract includes a claims procedure that requires the buyer to submit a written notice of the breach within 30 days of the missed deadline, along with supporting evidence of the financial impact. The procedure also specifies that if the claim is not resolved within 60 days, the parties must attempt mediation before proceeding with litigation.
In another example, a property owner files a claim with their insurer after a fire damages the building. The claims procedure requires the owner to notify the insurer within 48 hours, complete a claims form, and provide photographs and repair estimates. The insurer then reviews the documentation and decides whether to approve the claim or request additional information.
An example of a claims procedure clause
Here’s how a claims procedure clause might appear in an agreement:
“In the event of a claim arising under this Agreement, the Party making the claim must notify the other Party in writing within [specified number] days of the event giving rise to the claim. The notice must include detailed documentation, including but not limited to [required documents]. The Parties shall make reasonable efforts to resolve the claim within [specified time]. If the claim is not resolved within [specified time], the Parties agree to attempt mediation in good faith before initiating formal legal action.”
Conclusion
A claims procedure is essential for ensuring that claims are addressed in an orderly, consistent, and transparent manner. It sets out the rights and responsibilities of the parties involved, ensuring that claims are handled promptly and fairly. For businesses, it minimizes the risk of disputes and delays, while for individuals or counterparties, it provides clarity and certainty regarding how their claims will be processed. Including a well-drafted claims procedure in agreements helps protect all parties' interests and promotes smooth conflict resolution.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.