Product defects, damaged goods, an unexpected hazard––each of these could be considered a minor inconvenience when it happens to you or me at home, but what happens when your retail business receives a claim as a result of someone else’s negligence? How your organization responds to these claims is critical to your most valuable and vulnerable asset––your brand. A thorough and rapid investigation with supporting contractual requirements can not only lead to a successful transfer of exposure but also help protect your brand by identifying the responsible party, helping resolve your customer’s claim. Clear communication with the customer regarding other potentially responsible parties provides transparency and customer support at initial contact and throughout the claim process.
According to the Insurance Risk Management Institute, a tender is “the act in which one party places its defense and all costs associated with said defense with another due to a contract or other agreement. This transfers the obligation of the defense and possible indemnification to the party to which the tender was made."
In Retail, Not All Tender Options Are Obvious…
In retail claims, not all tender options are obvious, so it’s essential to think creatively, especially when the customer may only sue the retailer, whom they believe to be the responsible party, which is not always the case. Some possibilities for retailers to consider:
In all scenarios, obtaining copies of all contracts to review the insurance and indemnification language will help in understanding party responsibilities. Even if a contract does not exist, tendering a claim to a responsible third party is still an option under state negligence laws.
Key Considerations Before You Tender…
When deciding whether to tender, consider if the incident arose, even in part, out of your acts or omissions. How good is your investigation, and have you properly secured all evidence? How confident are you in the negligence determination? Often, business decisions in retail are an element that needs to be considered. Is there a relationship with the third party that is more valuable than the action of tendering the claim? Is it a low complexity claim that can be easily settled with a gift card to help preserve that customer relation? How strong is the indemnification language, and is it worth litigation to seek contribution? Are there insurance requirements in the agreement, and were those requirements met?
Knowing When to Tender is Equally Important…
A tender made too early may misstate or leave out facts that would lead to a defense or indemnity. However, a tender that is sent too late risks denial solely based upon late notice. A carrier’s duties generally start when it receives notice of a claim from any source. A liability carrier has no obligation to pay any costs incurred before it is put on notice of the claim, and these payments will be considered voluntary.
Always keep in mind statutes of limitation and statutes of repose along with contract language regarding deadlines and “reasonable time” requirements.
From a customer’s perspective, they don’t want to wait around while you try to determine what to do with the claim. For example, the coverage for product claims can travel back through the distribution chain all the way to the manufacturer. While this opens the door to make a claim against everybody involved in the product distribution, it can also be a time-consuming or fruitless process.
It’s Important to Track Tenders, Their Data, and Responses
Collecting data is an effective way for retailers to understand the frequency and types of responses you get from the third parties with whom your company contracts in tender situations. Such data elements should include the key components seen in the graphic below:
Remember the Importance of Customer Relations in Retail
Brand protection needs to be carefully and strategically considered throughout the tender process. Creating a good customer experience throughout the claim process will help protect your brand. Establish best practices with your claims administrator so there is clear direction on how these claims are handled depending on the scenario. Consideration, for example, should be given as to whether or not the claim should remain open until the tender is accepted. Follow-up calls to the third party will help speed up the claim process and keep the claimant informed of the status, which, in turn, creates goodwill. The customer should also understand why the claim is being tendered with an explanation of the business relationship with the third party. Even if the claim is not your responsibility, the customer may not see it that way, and you need to ensure the customer is happy for that essential return business.
Gallagher Bassett Claims Operation team members are equipped to investigate and handle your claim tenders as part of our claims management services. If you have questions about Gallagher Bassett’s claims handling capabilities for retail clients, please reach out to Mary McGurn.
Mary McGurn has 30 + years of industry experience and leads the Retail Practice at GB. You can find her on LinkedIn.