We can't recall a Canadian court precedent on this subject, but in general, we know that non-disclosure disputes are common and these disputes frequently impact on the brokers E&O cover.
We asked two leading GL experts to comment on this question Zurich Canada's Tom Cashmore points out that the printed application form used by most insurers only asks for information on losses which have occurred in the last three or five years. But the broker must disclose to the underwriter all material facts - or facts which might affect the underwriters view of the risk. The printed application forms establish a minimum level of risk information required by the underwriter - the specifications in the application won't over-ride the brokers general duty of disclosure.
Art Despard of the National Marketing Dept Aon Reed Stenhouse Inc also say the adverse development is "material" information. If the broker fails to do so, the consequences are his.
In summary, long latency, or delays between the original incident report and final settlement or adjudication are an inherent quality of GL business. That characteristic must be considered. You should disclose the loss reserve if you are aware of it. If for any reason, you are unable to obtain the current value of a loss, you should indicate the applicable valuation date.
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In June 1992, my client learned of an incident which he feared might give rise to a loss under his liability policy. We reported the loss to the general liability (GL) insurer, although at the time it didn't look as though my client would be liable for the claimants injuries. A lawsuit naming my client as one of the defendants was served in 1994 and a trial date has been scheduled for the fall of the year 2000. The claimants injuries now appear to be much worse than first realized and the insurer has recently increased the loss reserve from $15,000 to $750,000. I switched the client to another carrier two years ago. Should I report this old loss to my current GL insurer on renewal?