Insurance carriers litigate for a living, and are oftentimes planning a proactive lawsuit before a policyholder even hires coverage counsel. Nonetheless, businesses with large insurance claims are typically skeptical of suing insurance carriers.
This video addresses a concrete example of how to use litigation to maximize claim value. Here, a lawsuit was filed, and within weeks the insurance carrier was talking settlement. To learn more, please watch the video.
For a transcript of the video please see below.
When Should You Sue Your Insurance Carrier – An FCPA Investigation Case Study
We’d like to tell an interesting client success story and it relates to … Well, it is the leading developer in Central America. They also do things in addition to that, but they’re a developer in Central America and they had an issue in Mexico. Here’s what happened, they got a subpoena from the SEC and the subpoena listed, in re, you know how those subpoenas work, you see a caption at the top, and then they tell you to come in and they want all these documents and other things from you. The subpoena says in re a certain entity that was not them, and then it said, “We want from you …” lists a whole bunch of things and they were specific documents that were related to the Foreign Corrupt Practices Act, FCPA. Those specific documents were things like everything you’ve ever done that might relate to officials in Mexico, everything you’ve ever done with properties.
We had, had some great luck with FCPA claims under D&O policies and a long time client, we talked to them, they said, “Let’s go after it, let’s tender it to the insurance company.” We give it to the insurance company, it’s a subpoena, it’s a claim, it’s a really simple matter. It’s a claim, it’s covered, they should be stepping up and paying. In the meantime, the client is spending millions of dollars, the burn rate on this is incredible, which is typical for FCPA investigations. They have to hire lawyers, they have to hire forensic people to find all the old e-mails, they have to make sure they have everything in place, and then they got to have it all translated because the federal government doesn’t want to look at it in Spanish.
There’s all this stuff going on, all this money being spent and they’re footing the bill for it. It’s getting to be a problem because it’s just a significant cash drain. They’re fine handling it, financially, but it’s not a good place to be. What happens is, we tender to the D&O insurer, and the D&O insurer picks it up, and they basically say, “No, we’re not going to do it.” Why? Well, they had only one reason and their one reason was, “Hey, we saw that subpoena and the subpoena didn’t say in re … It said in re, some other entity,” by in re, that means we’re … They said, “You know, we’re pretty smart on this stuff and we think it means they were investigating someone else. They weren’t investigating your client.”
We said, “Well, that’s completely wrong, look at the questions, they’re asking for stuff from our client. They want stuff from our client, they’re investigating whether our client potentially had a problem under the FCPA.” The questions were very direct, they weren’t about this in re other company, they weren’t about some other company, they were about this client of ours. We went back and forth with the insurance company and the insurance company just said, “No.” Second time they said, “No.” third time they said, “No.” Client said, “I’m done letter writing. We need to take it to the next level. Get me a lawsuit and we’ll file a suit.” I said, “Well, it’s not always the best practice, but in this situation it seems to make sense.”
We had been at it with the insurance company a short period of time. The client said, “Look, we don’t play that way. We need to do the right thing, sue them, get our money, so go after it.” We file the lawsuit here, in Denver, and insurance companies don’t like being sued in certain states and Colorado is one of those states, so we sued in Colorado. Within weeks the insurance company said, “We want to talk to you.” We got together, we discussed it, and we reached a very great outcome. Now, the moral of this story is, sometimes you can sue, it’s okay to sue, it’s not a bad thing to sue your insurance carrier. It has an upside in that it can generate, very quickly, great results. Here we had those great results, the client has been paid, in large part, for all of their defense costs in defending this matter, and we had a great resolution.