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📋 '''Third-party claim procedure''' is the contractual mechanism within an [[Definition:Insurance policy | insurance policy]] — or within the indemnity provisions of a [[Definition:Sale and purchase agreement (SPA) | sale and purchase agreement]] covered by [[Definition:Warranty and indemnity insurance (W&I) | W&I insurance]] — that governs how the [[Definition:Insured | insured]] must respond when a [[Definition:Claim | claim]] or demand is brought against the insured by an external party, as distinct from a claim the insured itself identifies and pursues directly. In [[Definition:Liability insurance | liability insurance]], [[Definition:Directors and officers insurance (D&O) | D&O insurance]], and transactional risk products, the procedure establishes a structured sequence of notification, cooperation, and defense obligations that the insured must follow to preserve its right to [[Definition:Indemnity | indemnification]] under the policy.

⚙️ A typical third-party claim procedure requires the insured to notify the [[Definition:Insurer | insurer]] or [[Definition:Underwriter | underwriter]] promptly — often within a specified number of days — upon becoming aware of a claim, threatened claim, or circumstances that could give rise to a claim from a third party. The procedure then addresses who controls the defense: whether the insurer has the right to appoint counsel and direct the defense strategy, or whether the insured retains conduct of the defense subject to the insurer's oversight and consent rights regarding [[Definition:Settlement | settlement]]. Many policies require the insured not to admit liability, make payments, or settle the third-party claim without the insurer's prior written consent, as doing so could prejudice the insurer's subrogation or coverage position. In [[Definition:Mergers and acquisitions (M&A) insurance | M&A insurance]], the SPA's indemnity clause will often contain its own third-party claim procedure, and the W&I policy must dovetail with those provisions to avoid gaps or conflicting obligations.

🛡️ Adherence to the third-party claim procedure is not merely administrative — failure to comply can result in the insurer declining coverage or reducing the [[Definition:Claims payment | payout]], depending on the jurisdiction and the specific [[Definition:Policy wording | policy wording]]. In the United Kingdom, the Insurance Act 2015 reformed the consequences of late notification, moving away from automatic forfeiture toward a prejudice-based test, while in many US jurisdictions the outcome depends on whether the policy is "occurrence" or "[[Definition:Claims-made policy | claims-made]]" and on applicable state law. Across Continental European and Asian markets, similar principles apply but with local variations in how strictly compliance is enforced. For [[Definition:Broker | brokers]] and risk managers, ensuring that clients understand and can operationally follow the third-party claim procedure is one of the most important pieces of post-placement advice.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Claims-made policy]]
* [[Definition:Notification of claim]]
* [[Definition:Subrogation]]
* [[Definition:Liability insurance]]
* [[Definition:Warranty and indemnity insurance (W&I)]]
* [[Definition:Settlement]]
{{Div col end}}

Definition:Third-party claim procedure - Revision history

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