Brian Friel continues his roundup of The Ten Biggest Mistakes Made By Corporate Insurance Policyholders with point number five, the importance of challenging insurance billing rates. Far too often policyholders rely on insurance litigation billing guidelines and accepting whatever reimbursement an insurance carrier is willing to provide. The norm is for insurance carriers to apply a heavy discount to submitted legal bills. There are many ways they do this, and most of them are improper. In this video, Brian addresses best practices for challenging insurance billing rates, a problem that is present with most any liability insurance claim.
Challenging Insurance Billing Rates
One of the ways that insurance carriers attempt to limit their exposure is by arbitrarily limiting hourly rates that they are willing to pay for defense attorneys. Typically, insurance carriers cap hourly rates at a level that is far below market rates available to, and paid by, policyholders. Corporate policyholder are then left to make up the difference between unreasonably low reimbursement rates proposed by an insurance carrier, and the actual rate that policyholders pay for attorneys. This delta increases with complex litigation, where hourly rates are higher, and where cases take longer to resolve.
There is a solution to this problem. Watch the video to learn more about the importance of challenging insurance billing rates, and best practices for resolving disputed billing rates.
In today’s post Brian continues his discussion on the The Ten Biggest Mistakes Made By Corporate Insurance Policyholders, addressing the issue of relying on a certificate of insurance. Certificates of insurance are used in a myriad of situations to extend the interests under a liability insurance policy to a third-party. However, there are many shortfalls to relying on a certificate of insurance alone to transfer that interest.
Can You Rely On a Certificate of Insurance?
The problem is that a certificate of insurance, alone, is not always effective in transferring risk under an insurance policy. See Risk Transfer Nightmares. There is, however, a solution to this problem. Watch the video to learn more.
The central issue that Brian Friel addresses is what policyholders should do to evaluate a claim denial letter. But first, it is important to understand why so many claim denial letters are written and sent to corporate policyholders. The insurance business model is based on maximizing premiums and minimizing claims. The minimization of claims is done, in part, through the use of claim denial letters. Accordingly, claim denial letters are written for the purpose of convincing corporate policyholders that they should not pursue a claim. As a result, these claim denial letters are expertly drafted by outside insurance company legal counsel. They contain policy language and sometimes case law quotations. Many a policyholder has received such a letter and concluded that a claim is not worth pursuing. Based on this, insurance companies know that the strategy of sending claim denial letters works.
For a number of legal reasons, it is also considered “best practice” for an insurance company to deny any claim that they believe has the possibility of not being covered.
Claim denial letters are more often than not incorrect. Insurance carriers focus on what might potentially cause a claim to be excluded from coverage, and ignore obvious allegations bringing a claim within coverage under the policy. Claim denial letters often misstate the law and facts supporting coverage. Insurers invariably distort or ignore parts of the policy which support coverage, and conveniently overlook key facts supporting coverage. Legally, insurance carriers lose sight of the fact that there is a legal presumption of coverage for claim, and that all reasonable doubts must be decided in favor of coverage.
Fighting Insurance Claim Denial Letters
Improper insurance claim denial letters can be fought and reversed. Claim denial letters should be countered by a letter from insurance recovery counsel providing a thorough analysis of the facts and law supporting coverage. Policy language must be compared to the facts and allegations, and case law must be presented in a way that objectively lets the insurance carrier know that they made the wrong decision. Done correctly, the insurer will then open dialogue with respect to settlement. Watch the video to learn more.
Today, managing partner Brian Friel continues his series: The Ten Biggest Mistakes Made By Corporate Insurance Policyholders, addressing various consent and duty to cooperate issues that can arise with insurance claims. The coverage trap here is that policyholders may not tell their insurance carriers that they have hired outside counsel to defend the underlying lawsuit or that they have reached a settlement with the underlying plaintiff. This is a situation where the policy clearly covers the claim, but because of a policyholder’s failure to keep its insurer apprised of litigation developments, an insurer may refuse to pay some or all of the defense costs or settlement.
Tips on Maximizing Coverage
What we have seen over the years is that some companies and some defense counsel are not focusing enough on insurance, even in situations where notice is timely submitted and the insurance carriers have accepted coverage. Forgetting to inform your insurer of defense counsel invoices or an upcoming settlement meeting is like the functional equivalent of fumbling the football at the 5 yard line. You can still make a touchdown, but your claim is more difficult to make than it needs to be. In today’s video, Brian discusses how to avoid unforced errors. Watch the video to learn more.
In this post, Brian Friel wraps up his discussion of late notice in our series, The Ten Biggest Mistakes Made By Corporate Insurance Policyholders. The past two videos not only underscored the complexities and the importance of providing timely notice, but also addressed how insurers use the “notice trap” to deny coverage for corporate insurance claims.
Pre-Notice Defense Costs
In this video, Brian discusses an additional example illustrating how late notice ties into insurance coverage for pre-notice defense costs. In practice, insurance carriers treat pre-notice defense costs as uncovered, even if they are, in fact, covered. Failure to provide early notice, not only permits an insurance carrier to raise late notice as a defense, but it also provides the insurer with an opening to further discount amounts they will pay.
Brian closes the video with a helpful series of tips for corporate policyholders relating to notice. Watch the video to learn specifically what he recommends.
Today, managing partner Brian Friel continues his series: The Ten Biggest Mistakes Made By Corporate Insurance Policyholders. In this video, Brian continues with examples about why late notice can be a vexing problem for corporate policyholders. As discussed in Part 1: Late Notice, providing proper notice can be one of the most complex insurance issues that corporate policyholder’s face.
The Late Notice Trap
In today’s post, Brian give two examples of what he calls the “notice trap,” where insurers rely on highly technical language in their policies and aggressive arguments to deny insurance claims.
In the first example, we address the unique challenges faced with False Claims Act (FCA) Whistleblower actions. Procedurally, these kinds of claims present notice challenges because, when the files a legal complaint against a company, it is done in secret. Corporations are typically unaware that a complaint has even been filed, since the Government’s complaint is initially filed under seal. Thus, corporate policyholders may not even be aware that the case is being pursued. Then, when a corporate policyholder later becomes aware of the lawsuit, insurance companies frequently argue that it is too late to pursue coverage, because notice was not provided when the initial complaint was filed under seal.
Default Judgment Late Notice
In the second example, Brian explains how an inaccurate legal filing by a tort plaintiff resulting in the entry of a default judgment can put insurance coverage in jeopardy.
These examples seem frustrating and nonsensical, because they are, but they highlight the complexity of notice and the importance of understanding insurance policies and insurance companies when pursuing insurance claims.
Today managing partner Brian Friel starts a new series: The Ten Biggest Mistakes Made By Corporate Insurance Policyholders. In this series, Brian discusses the ten most common mistakes that policyholders make when pursuing corporate insurance claims. These mistakes are not limited to unsophisticated corporations. Mistakes are made by companies of all sizes and industries, from regional manufacturing and engineering companies to the Fortune 100 banks and pharmaceutical companies. As a firm with decades of experience in the area of insurance recovery law, we tend to be engaged after something has gone wrong. Our hope is that this series will help corporate policyholders identify areas of risk within the claims process at an early stage, so that an informed decision can be made about the value of insurance recovery advice relied upon by corporate policyholders.
The first issue that Brian covers is late notice. This is a significant issue for corporate policyholders because in some situations, in certain jurisdictions, it may result in the forfeiture of coverage. Unfortunately, notice is complex, and policy language is structured to elicit mistakes, and such errors can result in an otherwise avoidable denial of coverage.
We have divided this first issue on Notice into three short videos. In this first part, Brian addresses the two types of policies, “Claims Made” and “Occurrence.” He also addresses how notice requirements, and the law, can be different for each type of policy. There are major differences between policies as to what kind of event triggers notice, and these differences chan have an enormous impact on when notice is required.
There is a lot to understand about notice, and no video series can fully prepare policyholders for the challenges they may face. Nonetheless, we hope that this helps policyholders understand that notice is complex and difficult. We hope you find this first part on Notice useful. Please look out for future posts on this subject in particular, and for the continuation of Brian’s series.
This video depicts an incredible story of how AIG mishandled a massive pipeline explosion claim, only to get tagged at trial with an equally massive bad faith verdict. We include some shocking video of AIG’s lead claims adjuster, seriously calling into question the old adage that, “you can’t win or lose a case based on a deposition.” Watch to see just how contemptuous and dismissive this adjuster was, and see how, in the correct hands, experienced trial counsel can use this kind of testimony to achieve incredible results for corporate policyholders.
In today’s video, Brian Friel tells the story of how Miller Friel fought on behalf of one of its clients, El Paso Corporation (now a part of Kinder Morgan, the largest pipeline operator in the country), against AIG, one of the world’s largest insurance companies. The claim and resulting trial involved an epic insurance coverage battle over commercial general liability (CGL) insurance coverage. The complexities of the claim were magnified because El Paso sought coverage as an additional insured under a CGL policy issued to one of its contractors. SeeRisk Transfer Nightmares. An explosion occurred during the construction of a natural gas pipeline in Wyoming, when a back hoe operator constructing a new pipeline struck an existing El Paso high-pressure natural gas line causing it to rupture and explode, resulting in the catastrophic death of a construction worker and millions of dollars of property damage. El Paso and its vendor rightfully expected AIG to settle the claim with the decedent’s estate and cover the property damage, up to AIG’s the $5 million policy limits. Unfortunately, AIG refused to contribute a single dollar to settle either the wrongful death claim or the property damage claims, and even refused to attend the mediation with the decedent’s family members despite being invited by the mediator, thereby leaving both El Paso and its contractor to fend for themselves.
As Brian recounts in the video, AIG’s denial was based on unsupportable and even extreme interpretations of its policy and, even worse, AIG and its claims adjusters refused to cooperate with El Paso in any way to resolve the underlying claims. Given AIG’s intransigence, El Paso had no other choice but to settle the underlying wrongful death claim, and file suit against AIG for breach of contract and bad faith. Miller Friel ultimately litigated the claim against AIG through trial in Denver state court and obtained a judgment that AIG breached its obligations under the policy and violated its duty of good faith and fair dealing to both El Paso and its vendor. See Colorado Interstate Gas Co. v. National Union Fire Ins. Co. of Pittsburgh, Pa. The court awarded $13.7 million in damages, which included full coverage for El Paso’s settlement with the decedent’s estate and the property damage claims, pre-judgment interest, lost business profits, court costs, and $5 million in punitive damages as a result of AIG’s bad faith.
Based on the evidence presented, the court concluded that AIG’s bad faith breach of the insurance contract “was accompanied by circumstances of willful and wanton conduct which justifies the imposition of punitive damages.” The AIG adjuster’s videotaped testimony shown here was central to this award (his deposition testimony was allowed at trial because he refused to appear at trial). The court noted that AIG’s demand that “El Paso waive any future bad faith claim in order to waive the Voluntary Payments clause and allow [AIG] to settle . . . demonstrates that [AIG] recognized that its conduct was willful and wanton.”
This case illustrates the value that experienced insurance recovery trial counsel can bring to a case. Insurance carriers don’t always act reasonably, and when they don’t, it may be necessary to try a case against them. This particular claim illustrates the full skill set of Miller Friel and its lawyers, namely, the ability to present a claim, and then, when necessary, to follow through with it both at trial and on appeal if necessary. What we have learned over the years is that, while negotiated settlements are generally the best outcome for our clients, achieving settlement is easier when the insurance companies know that we are capable of inflicting real damage if they do not act appropriately. Insurers know that Miller Friel will litigate and try cases if they deny valid claims or take other unreasonable coverage positions. This is what sets Miller Friel apart from other firms. Trying cases is markedly different from writing briefs. Evidence must be presented to paint a picture for the judge or jury telling a compelling story. This cannot be done without careful attention to each and every witness, both before and during trial.
Miller Friel is proud of this result , which our clients have characterized as simply incredible. AIG should have settled this case early on, and had ample opportunity to do so prior to trial. That was AIG’s mistake, a mistake it won’t likely make again, at least if Miller Friel is involved.
For decades, insurance companies have resorted to narrow views of insuring clauses and expansive interpretations of exclusions to limit or void coverage. In the last 5-7 years, there has been an explosion in rescission claims by insurers. Now, more and more insurers are asserting rescission as an additional reason for denial of coverage.
Rescission is an old contract law concept, where, due to fraud and even innocent mistakes, a court treats a contract as non-existent. The remedy is to put the parties in the position they were in prior to contracting. In the insurance context, the court treats the insurance policy as if it never existed (void ab initio), and the remedy is for the insurer to refund all premiums paid, leaving the policyholder without insurance. The basis for rescission is most always a material misrepresentation in the underwriting/application of the policy.
The rapid rise in the number of rescission claims is reason for alarm. Ten years ago, only 1-2 rescission claims per year were asserted against our corporate clients. Today, we see insurers asserting or threatening to assert rescission in the majority of claims. This is no accident. Insurers, over time, crafted insurance application language that can be virtually impossible to answer correctly. Then, when a claim is submitted, insurance company lawyers scour insurance applications and financial filings to find any possible mistake or misrepresentation, whether intentional or simply inadvertent.
In this episode of our Top Ten Insurance Issues for Non-Insurance Lawyers, Brian Friel discusses the marked increase in rescission claims, and what policyholders can do to protect themselves against rescission.
Rescission claims are best fought using a two-prong strategy. First, insurance application issues need to be addressed prior to a claim being made. Here, we proactively protect our clients against rescission by working with them and their brokers in the application process. As Brian points out in today’s video, it’s not just important to answer the questions as precisely as possible, but it is also critical to create a written record correcting, or at a minimum pointing out, ambiguous or overly broad application questions. Where possible, egregious application language needs to be stricken, and unfair questions need to be noted.
Second, a thorough knowledge of rescission law, including its origins and development, can be used to counter an insurer’s attempt to rescind. In reality, rescission is a drastic remedy that has no real place in insurance law.
To learn more about rescission, please watch the video, and feel free to contact us with any questions you may have.
Corporate acquisitions and spin-offs are common. Although most companies involved with acquisitions are aware of the concept of tail coverage, many companies miss the second more important step in the process, which is to specify that the acquiring company has rights to pursue coverage for claims arising out of pre-acquisition wrongful acts. This simple concept is not always executed properly, because it requires that specific endorsements be added to the acquired companies policies, and very few risk professionals obtain these endorsements.
In today’s video presentation, Brian Friel addresses how to handle post-merger/acquisition claims, a topic that we rank as number 7 in our Top Ten List of Insurance Issues for Non-Insurance Lawyers.
Brian explains the importance of thinking through these issues carefully before closing, and provides examples of how Miller Friel has successfully recovered on claims for large corporate entities under acquired company insurance policies.
An absolutely critical component of any transaction is run-off or extended reporting coverage, whereby a claims reporting tail is added to the acquired companies policies as a condition to closing. Although directors and officers of the acquired company may demand this coverage feature, the real value, if executed properly, is to the acquiring company. As Brian explains, this benefit is magnified for larger acquiring companies for at least two reasons. First, large companies typically have significant self-insured retentions. Accordingly, it makes sense to place later-filed claims under acquired company policies rather than under the acquiring companies’ insurance policies. Second, if the acquired company is non-public, it likely has more expansive and generous D&O insurance coverage than, for example, an acquiring public company might have.
The claims example Brian discusses is for a large publicly traded pharmaceutical company client of Miller Friel that acquired a smaller non-public pharmaceutical company. The acquiring company was self-insured, but through expert negotiation and implementation, the acquiring company had rights to pursue coverage under the acquired company’s insurance policies, which contained low deductibles and better entity coverage than was available to the acquiring company.
At Miller Friel, our lawyers routinely assist corporate lawyers to make certain that valuable insurance rights are protected, and we have also successfully pursued a myriad of post merger/acquisition claims for large corporate clients. Please watch the video to learn a lot more about how this process works and the services we provide, and give us a call if you have any questions. Our telephone number is 202-202-760-3160.