The second issue in our continuing analysis of the top ten insurance issues for non-insurance lawyers is the full recovery of defense costs. Liability insurance policies cover both the defense of claims and the indemnification of judgments or settlements. Since the defense obligation comes first, this is the first time that most corporate entities obtain a glimpse into their insurance carriers claims handling practices. Unfortunately, there are many ways that insurance carriers attempt to limit their defense obligation, and knowing the defense cost tricks that insurance companies play is an important prerequisite to the full recovery of defense costs.
In today’s video, Brian Friel discusses the importance of defense costs coverage, how insurance companies, attempt to limit the amount of defense costs they pay, and how businesses can better position themselves to maximize their insurers’ payments of defense costs.
The defense obligation is paramount to any liability insurance policy. As many courts have stated, liability insurance is “defense insurance.” In most claims, a policyholder’s biggest and most immediate exposure is paying for defense counsel. Yet, even when an insurer agrees to advance or pay defense costs, insurers to look for ways to pay less than one hundred percent of costs incurred. Insurers employ a number of tactics to do this. A common tactic is to argue that certain of the underlying claims are not covered. Similarly, insurers may argue that some of the defendants are not insureds under the policy. When they are done with this analysis, it is not uncommon for them to propose a 50 to 75 percent reduction on defense costs. Insurers also argue that the most they will pay is some limited hourly amount. Recently, we had a matter where the insurer stated that the most they would pay was $250 per hour, for a highly experienced New York City lawyer, in a case involving complex business torts. Unfortunately, these kinds of tactics are more common than not, and the net effect of all this discounting is the erosion of the very purpose of an insurance policy – to provide a complete and effective defense to policyholders facing litigation.
Vigorous Pursuit of Insurance Recovery Claims
As Brian discusses in the video, Miller Friel’s strategy for the full recovery of defense costs is to identify issues early on, and aggressively negotiate with insurers at the outset of a claim, to bring the insures towards full reimbursement. With respect to defense costs, we have found insurers respond favorably to well-crafted legal arguments, and that it is seldom proper to accept what insurers first propose. Our singular focus is maximizing policyholders’ claims. We are a specialty law firm that is sought out by national and international clients to address this exact issue, and we have successfully addressed this defense costs issue repeatedly before.
If you have any questions, or if you are in the position to need assistance, please give us a call at 202-760-3160.
To see the whole series, check out Top Ten Insurance Recovery Issues For Non-Insurance Lawyers.