More now, than any other time that we can remember, policyholders in corporate insurance recovery cases seem to be getting it wrong. Policyholders are losing corporate insurance recovery cases that they deserve to win. As we study insurance coverage decisions, we cannot help but notice the cause of the problem: policyholders are either being given bad advice, or they are making critical preventable mistakes. This is the reason why we developed this Top Ten List of Insurance Issues for Non-Insurance Lawyers.
First, a little background into the problem. Lawyers are critically important to corporate policyholders, both with respect to advising on claims, but also with respect to reviewing coverage. Lawyers, whether in house, or at an outside law firm, are some of the first to become aware of potential claims. Ever evolving insurance coverage case law, a complex statutory overlay governing insurer conduct, and incomprehensible insurance jargon, can make it difficult for lawyers to obtain straightforward answers to insurance problems. Fortunately, a little knowledge goes a long way towards preventing corporate policyholder missteps.
As history has shown, it is not all that easy to obtain accurate advice on corporate insurance issues. As most partners at large prestigious law firms know, insurance ties with the legal industry are are vast and complex. Arrangements between law firms and insurance carriers to control corporate insurance claims are widespread. Most large law firms represent insurance carriers in some capacity, and rules of engagement with insurers are often adopted to keep insurance company business, and to minimize law firm financial backlash from insurers when they pursue corporate insurance claims. These rules of engagement may include, among other things, a prohibition on filing bad faith lawsuits, limitations on discovery against insurers, and an understanding, that if things get rough, strings will be pulled to pull off the attack dogs.
Non-insurance lawyers looking into insurance claims should also be aware that insurance brokers face similar challenges. Any good insurance broker will admit that they are walking a find line when it comes to providing advice on corporate insurance claims. Insurance brokers are typically paid by insurers, and, in many instances, they are financially rewarded based on losses paid on their accounts. They make more if their client-policyholders do not make claims. As a result, their first reaction may be not to tender a claim, or to try and convince a policyholder that a claim is not covered. If a policyholder persists, the next step that brokers use to manage the claims process is to involve their in-house claims advocacy group. These in-house claims advocacy groups serve the purpose of managing client expectations by helping them align policyholder client beliefs with insurer demands. Communications with broker claims advocacy lawyers, however, are likely not privileged, and given their goal of compromising claims, they oftentimes create smoking gun documents that can seriously harm a policyholder’s coverage position.
Non-insurance lawyers should should take these considerations into account. Many a policyholder has been persuaded by an insurance company lawyer or insurance broker to compromise a claim, or worse yet, to drop a claim that an insurer is passionate about denying. Independent accurate claims advice is difficult to find.
Top Ten Insurance Recovery Issues For Corporate Policyholders
Our top ten list of insurance recovery topics for non-insurance lawyers includes:
- Defense Costs,
- Government Investigations,
- Independent Investigations,
- Cyber/Intellectual Property Claims,
- D&O Insurance Terms and Conditions,
- Post-Merger Acquisition Claims,
- Criminal Activities, and
Insurance policy notice provisions are often treacherous for policyholders, but with proper analysis, coverage can be preserved.
2. Defense Costs
The second issue in our continuing analysis of the top ten insurance issues for non-insurance lawyers is the full recovery of defense costs. Insurance carriers make it difficult for policyholders to get a fair read on coverage.
3. Governmental Investigations
More often than not, governmental investigations are covered.
4. Independent Investigations
The fourth topic in our list of Top Insurance Issues for Non-Insurance Lawyers is coverage for so-called voluntary or independent investigations.
5. Cyber and Intellectual Property (IP) Claims
In this video, we address an oftentimes overlooked area of coverage, that is, coverage for cyber and intellectual property claims under general liability insurance policies. Don’t overlook “advertising injury” coverage provided in general liability insurance policies.
6. D&O Insurance Policy Terms and Conditions
Sophisticated organizations routinely engage outside counsel to review their Directors and Officers liability insurance policies. If done correctly, it can result in vastly superior coverage. But, relying on standard forms and pre-drafted policy enhancements can be a recipe for disaster.
7. Post-Merger/Acquisition Claims
Corporate acquisitions and spin-offs are common. Most people involved in corporate acquisitions are aware of the concept of tail coverage, but certain things need to be done to a tail policy if an acquiring organization intends to pursue coverage.
8. Rescission of Insurance Policies
In the last ten years, there has been an explosion of rescission claims by insurers. More and more, insurers are asserting rescission as an additional reason for denial of coverage. In reality, rescission is a drastic remedy that has no place in insurance law.
9. Insurance Coverage For Criminal Activities
Many non-insurance lawyers assume that criminal activities are not covered by insurance; in fact, the exact opposite is true.
In our final installment of the Top Ten Insurance Issues For Non-Insurance Lawyers we address the issue of privilege. Case law addressing insurance broker communications has not ended well for policyholders, but steps can be taken to minimize adverse results.
Questions About Corporate Insurance Recovery
Over the years, insurance recovery law has become highly specialized. The nuances of insurance law may fall outside the scope of in-house or outside counsel expertise. Knowing what questions to ask can go a long way towards identifying key insurance issues and preventing needless insurance-related mistakes
We hope that this series was helpful. If you have any questions about these or any other corporate insurance coverage issues, please feel free to contact us.