Buried Treasure: Finding Resources In Your Insurance Policies

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Buried Treasure:Finding Resources in Your Insurance Policies

John L. Watkins

[email protected] Piedmont Road, N.E.Suite 1700Atlanta, Georgia 30305(404) 264-4043 (Direct)(404) 663-0538 (Cell)

Mari Yamamoto Regnier

[email protected] North Wacker DriveSuite 4400Chicago, Illinois 60606-2833(312) 214-8335 (Direct)



Barnes & Thornburg LLP who is authorized to receive it. This page and all information on it may not be reproduced, in any form, by anyone without the express written consent of the author or presenter. 2




Are You Sitting on Buried Treasure?



Barnes & Thornburg LLP who is authorized to receive it. This page and all information on it may not be reproduced, in any form, by anyone without the express written consent of the author or presenter. 3




Your Insurance Policies May Provide Hidden Resources




This Presentation Will Help You Find It!

• How policies cover claims

• Unexpected claims your policies may cover

• Possible gaps in your coverage

• Common sense steps to protect your business

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Caution!

• This presentation will not make you an expert

• Insurance is complicated• Just about every “rule” has an

exception!• Goal is to increase your

awareness of insurance resources

• Get professional advice from your own jurisdiction!

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The Basics: How Liability Policies Are Structured

• Policies typically are written for one year periods– And renewed or replaced every year

• “Occurrence” policies typically include:– Commercial general liability– Excess liability (sometimes “umbrella”)– Motor vehicle policies (“accident”)

• “Claims made” policies typically include:– Professional liability (malpractice; errors and omissions)– D&O policies– Environmental liability coverage

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“Occurrence” vs. “Claims Made”

• “Occurrence” policies cover liabilities:– Resulting from an “occurrence” (an act or omission, accident or

event)– That happens during an annual policy period– Regardless of when the claim or lawsuit is asserted

• “Claims made” policies cover “claims” (demand for money or lawsuit):– Made (and usually reported) during the policy period– Regardless of when the act or omission happened– But subject to the “retro date”

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Policy Period Begins (12/01/2010)

"Occurrence" (07/01/2011)

Policy Period Ends (12/01/2011)

Claim or Lawsuit (11/01/2013)

2010 2011 2012 2013 2014




Occurrence Policy: How It Works

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Retro Date (01/01/2005)

Act or Ommission

Policy Period Begins (12/01/2010)

Claim Asserted (08/11/2011)

Policy Period Ends (12/01/2011)

2005 2006 2007 2008 2009 2010 2011 2012 2013




Claims Made Policy: How It Works

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Occurrence vs. Claims Made: What It Means

• Occurrence policies can cover claims made decades after the policy was written

• “Claims made” policies were developed by insurers to avoid “long tail” risks

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Buried Treasure in Old Insurance Policies

• Most occurrence policies (CGL and excess) provide coverage for claims for “bodily injury” (including death) or property damage subject to stated exclusions

• Older policies often have broader coverage with fewer exclusions

• “Long tail” risks that may be covered include:

– Environmental claims

• For example, old plant sites

– Asbestos claims

Note: Plaintiff’s lawyers are now on third or fourth tier targets Companies with little obvious risk may have exposure

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Most Likely “Treasure Hunters”

• Companies long-term on-going operations

– Paper and wood product companies

– Chemical companies– Manufacturing companies– Utilities

• Do not forget about mergers and acquisitions!

– Insurance review should be part of “due diligence”

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Buried Treasure: Defense Costs

• Never assume a claim is not covered

– Insurer’s basic obligations usually include providing a defense and paying claims and judgments

• Basic rule: If any part of a lawsuit is potentially covered, the insurer must defend the entire case

– Obligation to defend is broader than obligation to indemnify

– Defense obligation can save hundreds of thousands of dollars

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Buried Treasure: Unexpected Coverage

• Insurance coverage is not intuitive

• Types of claims that may be covered

– Construction defects– Defamation (libel and slander)– Trade secret violations– Breach of contract (if coupled with negligence allegations)– Breach of fiduciary duty

• Always assume a claim may be covered

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Current Coverage Issues: Buyer Beware!

• The on-going game:– Courts find claims are covered– Insurers add exclusions

• “Commercial general liability policy” is not so general anymore

• Exclusions increase every year– “Absolute” pollution exclusion– Fungus exclusion (mold)– Asbestos exclusion– Silica exclusion

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Aggressive Coverage Positions

• Insurers combine increasing exclusions with aggressive efforts to deny coverage

• Example: “Absolute” pollution exclusion

– Purpose was to avoid liability for environmental risks– Use has expanded far beyond this:

Death resulting from carbon monoxide from faulty furnace Curry odor from Indian restaurant Can result in the “never pay policy”

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The Era of “A la Carte” Coverage

• Insurers are forcing insureds to buy specific extra coverage or to pay extra to avoid exclusions

• Examples

– Professional liability coverage– Environmental coverage– Cyber-liability risks– Sexual misconduct coverage

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The Critical Importance of an Expert Agent

• Insurance is bought through agents and brokers

• Agents are not equal

• Agents should:– Develop a comprehensive

understanding of your business and risks

– Be able to advise regarding coverage trends and risks

– Be expected to review all coverage, including major exclusions

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Common Sense = Buried Treasure

• Obtain copies of all policies– Not just the “declarations”

pages

• Keep copies of all policies

• Find copies of old policies– Ask agent or broker

– Ask insurance company

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• Assume any claim may be covered

• Provide prompt notice– Insurers often deny coverage

based on late notice

– Particularly critical for claims made policies

– Do not assume it’s just a technicality!

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• Special considerations apply to claims made policies

– Claims must often be “reported” during the policy period– In order to have continuous coverage, coverage must be

renewed every year– Or purchase an “extended reporting period”– Very important if you are exiting a business

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• Never accept your insurer’s determination (or even your agent’s) that a claim is not covered

• When to involve coverage counsel:

– If there is a “bet the company” claim– If you receive a “reservation of rights” or “denial” letter– If you need a comprehensive review of your insurance program

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What Do Coverage Lawyers Do?

• Evaluate coverage programs

– Including regarding mergers and acquisitions

• Evaluate coverage for particular claims

• Monitor and serve as independent counsel in claims being defended by insurers

• Negotiate with insurers

• If necessary, file or defend coverage and bad faith litigation

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Conclusion

• Goal: Increasing your awareness of possible insurance resources

• Questions?

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Buried Treasure: Finding Resources In Your Insurance Policies

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