Today’s blog post is the second video in a two-part series by Miller Friel attorney Tab Turano discussing the importance of the supplementary payments provision in general liability policies. This clause is designed to cover a number of ancillary liabilities faced by companies that are dragged into litigation and forced to go to trial, including awards of plaintiffs’ attorneys’ fees, interest awarded by the court, and the costs associated with appeal bonds. The video highlights, by way of example, how policyholders may rely upon the supplementary payments clause to collect far more than policy limits of liability – often times, ten, twenty, or more times the policy’s limit of liability. Also addressed are insurers’ recent attempts to curtail this all-important coverage.
Please watch the video to learn more, or Contact us if you have any questions.
To see the first half of this video, visit: The Supplementary Payments Provision, Part 1.
We have included a transcript of the video below:
The Supplementary Payments Provision (Part 2)
And the other point to consider is that again, based on the plain language of the provision, supplementary payments is not limited by the policy’s $1 million-dollar limit of liability. Again, you’re entitled to here, in our example, to recover $10 million dollars under a $1 million-dollar policy. The importance of the supplementary payments provision should never be overlooked. Of course, in circumstances like this, insurance companies often push back. We’ve had cases where we’ve made claims for millions and millions of dollars in supplementary payments and the insurance company comes back and says, “You guys have got to be kidding. That would be a windfall. You want us to pay you $20 million dollars under a $1 million-dollar policy.”
Unfortunately for the insurers, there have been many courts that have taken up these arguments. What they’ve basically held is that, look these provisions are clear and unambiguous on their face. They’ve required the insurers to pay all of these amounts. There’s no right for the insurer to allocate supplementary payments between covered and uncovered claims, or covered and uncovered portions of a jury verdict. They owe it all. The caselaw out there is generally very favorable for insurers. Courts have held quite readily that you are entitled to recover the full amount of these types of post judgment relief.
One thing to keep in mind, however, is that, I think in reaction to some of the cases out there that have held in the insurer’s favor, finding that these provisions are clear and unambiguous and can be enforced, insurance companies have attempted to erode the scope of coverage under these provisions through endorsements to policies during the underwriting process. For instance, we’ve seen in recent policies that our clients have purchased, endorsements that say the insurer’s obligation to cover attorneys- fees or prejudgment interest as supplementary payments is limited by the policy’s $1 million-dollar limit of liability. We’ve seen other endorsements that provide that insurers will pay that portion of plaintiff’s attorneys’ fees or prejudgment interest related to that portion of the judgment they pay. In other words, in our example above, if you get hit with a $15 million-dollar judgment, and only $500,000 of it is actually covered under the policy, based on that endorsement, the insurer would say, “We’re only going to pay you the interest and the attorneys’ fees that relates to that $500,000 portion.” So you’re going to get, for instance, I believe it’s 1/30th of your fees and your interest paid.
It’s important one, to recognize the value of a supplementary payment’s provision when you’re engaged in litigation. And two, during the underwriting process, it’s important to be aware of the scope of coverage under these clauses and to make sure that the insurers aren’t successful in eroding the scope of that coverage through various endorsements to the policies.