Is Separate Coverage Required for Suits vs. Claims?


You’ve heard of employees filing a suit against their company. You’ve also heard of people making a claim against their employer to demand financial compensation. So what’s the difference? Are these the same? Do you need separate insurance policies to cover claims and suits?

Suit definition: A suit is a proceeding involving damages due to personal injury, property damage, or bodily injury. It is a civil action, not criminal. Suits also may involve arbitration proceedings and other forms of alternative dispute resolution.

Claim definition: A claim is a “demand” for damages. If a lawsuit involves demands for damages, it is considered a claim. However, not every claim is a lawsuit. Some claims are “requests” for damages, as occurs when an employee doesn’t file a lawsuit but has sent a letter with a complaint requesting money for specific damages. If the request is not met (or not met by a specified date), the employee may then file a lawsuit.

Insurance Coverage: Both claims and suits are typically covered by general liability policies. However, specific circumstances may require endorsements that protect against those particular scenarios.

It’s important to respond promptly to either a suit or a claim made against your company. If you are faced with one, it’s also essential to contact your insurance provider as soon as possible to determine your coverage. Often, providers must approve settlements, such as those made in arbitration, for coverage to kick in.

Ensure you have the proper policies in place by discussing options with your agent.