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Insurance Recovery Litigation - The Basics

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Insurance Recovery Litigation - The Basics

Suing an insurance company involves nothing more than a contract case but, then again, is it? There is so much more to know about insurance recovery litigation. How do you understand the issues you need to spot in order to evaluate one of these cases? What do you do when a client walks in with an insurance recovery problem? What are some of the unique problems that arise when your client needs to sue an insurance company, or an insurance company sues your client? In this program, we lay all of this out for you and in a simple and understandable way.


Evan Schwartz
Founder, CEO, Managing Partner
Schwartz, Conroy & Hack, PC


Evan Schwartz:  Hello everybody. My name is Evan Schwartz. I am the founder of the law firm, Schwartz, Conroy & Hack. We are an insurance recovery law firm and insurance recovery in our wonderful legal world is lawyers who go after insurance companies when they are denying, disputing, short paying or not covering claims. I am here to talk to you today about the basics of insurance recovery litigation. And I've been practicing in this field in various ways for 30 years. When I started after the law school, my first job was a law clerk at the New York Court of Appeals knowing that I was going to a firm that did insurance recovery defense work, the power they'd be at the court would give me matters in insurance to work on.

  When I got to the large law firm I worked on defending mostly environmental cleanup insurance recovery claims but also a variety of other insurance recovery matters including then taking a case as an advocate on behalf of State Farm Insurance Company to the New York Court of Appeals and winning it along with a team of two other lawyers.

  After that, I became a solo practitioner, had a diet of insurance recovery matters and then formed a firm in 2006. And from 2006 on, I have practiced exclusively as an insurance recovery lawyer handling both claims and litigation in all types of insurance recovery matters. So I have a vast amount of experience in this area. I'm still practicing and still handling these matters as we speak.

  So that's a little bit about me and my background. And I'm here to give you some general information to help you understand this practice area and to know how best for you to approach these cases when they come in, think about these cases if they do come in, or issue spot at the very least, if you're never going to handle these cases to figure out where to send them to or tell your client what they need to consider or do without necessarily rendering full-blown legal advice.

  So to start, and I think the easiest way to start is, the beginning of any insurance recovery matter starts with an insurance contract, an insurance policy. And when we're talking about insurance policies, and when we're talking about insurance recovery, you have a broad, broad spectrum of insurance, and it continues to grow as new markets open up and new products come into being, there are products that also came into being, and then went away.

  The most classic example being Y2K Insurance back when 99 turned to 2000 and there was this enormous fear that computer systems and other systems were going to fail because they weren't going to recognize the new century. And a lot of people bought insurance coverage for that. And the insurance companies made out like bandits, but there are all kinds of other products that have come and gone and there are lots of new products coming and with the changes that we're going through in technology and privacy and security and all the other things that are happening in our world, there will be more and more products that will come out, but they always start with an insurance contract. And when you're meeting with, and, or advising a client, whether you're potentially representing an insurance company or you're representing the insured, you always want to start that analysis with a copy of the relevant insurance policy or policies.

  So let's talk about the different types of policies that are out there. And to start with that, we need to talk about the coverages that ordinarily you have in insurance contracts. Mainly speaking, you have either a first party coverage or a third-party coverage. What is that? Well, first party coverage is the coverages that you have where you or your business will make a claim directly to the insurance company for a loss that you have suffered to property of some sort or a bodily injury that causes you to have a claim directly against your own insurance company for a loss that you've suffered.

  So what type of policies are we talking about here? Well, the most classic policies in the individual benefits space would be your life insurance, health insurance, long-term disability insurance, long-term care insurance, accidental death and dismemberment insurance are examples of a first party type of coverage where it's just covering you. In addition, there are property coverages that policies will cover. Most people that have property coverages will have a blend of both property and liability or third third-party coverages. But obviously if you have a home or a car or you own a business and you have a loss as a result of a potentially covered incident, an accident, there is a storm, there is a power outage, all kinds of different things that could trigger or cause the insurance company to potentially cover your loss, that's where property coverage is going to come in. And first party property coverage can be both for you personally, or your business.

  So first party coverage, you against your insurance company for a loss, you have suffered directly that doesn't involve a claim by a third party, which leads us of course to third party coverage. And third-party coverage is more of what you would understand to be liability coverage and liability coverage is that type of coverage that insures you or your business when someone outside of the relationship between you and your insurance company makes a claim against you or your business. They're now saying you need to reimburse me for a loss that me or my business suffered. And they are a third party to your contract with your insurance company and they are seeking money from you for a loss, that is a third party liability claim. And we all have, or most of us that are on this planet that either own a car or a home or have an apartment or something are going to have some form of liability average to cover us in case that claim gets made.

  And third party liability coverage can also be more exclusive types of policies like directors and officers liability policies for officers of corporations or of nonprofits. Products liability coverage is another example of that where it's exclusively related to potential liability claims to be asserted and not necessarily any property damage coverage. Another example would be employment practices liability insurance, a very popular item amongst businesses now given all of the types of employment claims that have proliferated over the last few years in that coverage. So that's your examples of third party liability coverage. And as you look at those two, as I was saying before, a lot of people have a blended coverage where they'll have both liability coverage and property coverage and automobile insurance policies as well as homeowners policies and general liability or BOP policies, business owner policies cover both property and liability, right?

  So your automobile policy covers your automobile and perhaps the possessions contained in it in the event that there is an accident of fire, of theft, a water damage claim, an accident. Same thing in your home, you have furniture, you have the construction, the home, the house, or your apartments belongings. These things would be covered under your business or personal auto policy or homeowners policy. And in addition to that, there'll be a separate coverage for the liability claims.

  And so most claims that roll around in the world, the vast majority of claims fall in this United States under these auto policies, homeowner policies and business owner policies, because mostly they are property and general liability claims although there's still a vast number of other types of claims. So really when you're looking at coverages, you are looking at first party, third party, or a combination of both first and third party coverage.

  Another newer coverage that can cover both of those that I didn't mention earlier is cyber liability insurance. So cyber insurance claims have proliferated and are growing and growing and growing, and so that coverage has become significant in the insurance world. So there are other types of insurance policies that I haven't mentioned in this particular discussion of the general insurance policies you would have, the surety contracts, there are different types of, there's something called representations and warranties insurance that covers people in business transactions. There are all types of coverages but because this is a general discussion to get you just thinking about how insurance works and what you might need to think about if a client walks into the office and there might be an insurance issue related to what they're dealing with, it gives you some general knowledge to think about what's out there and how it works.

  So you've got yourself these different types of policies. And then the next thing is, well, what does an insurance policy really look like? A lot of people haven't seen them before and when they open them up and they see them, they look like there are some ancient text that's written in hieroglyphics and it's hard for them to understand and parse out what's there. So let's just talk the basics of an insurance contract. What's in it?

  Well, the first thing is you have a summary of coverages at the front of the policy typically, it's called your benefits pages, your schedule pages, your declarations page. It's telling you, hey, here's your contract? Here's the policy period it covers. And here's what you bought. A summary of the things that the coverages that are available to you that you purchased when you or your business bought this contract.

  And when you have let's say a homeowner's policy or an auto policy, a lot of times, as you renew year in, year out, and you're not making changes to the underlying contract, the insurance company will send you or your broker just the schedule or declaration pages but not the rest of the policy. So a lot of times a client will send you what they think is a policy but all they're really sending you is that summary because they had renewed it and didn't realize that the original policy with all of the other terms and conditions was not part of the renewal but the declaration pages is important. Policy period, benefit amounts which you're entitled to, what you're covered for and what the premium costs are, are generally contained in the schedule pages of the policy that's at the beginning.

  As part of the schedule pages, the riders or endorsements to the policy, the extras that are either required by individual state law to be attached or that you've purchased and negotiated will be referenced on the schedule pages and the premium you're paying for those, if any, will also be listed on the schedule pages.

  So a lot of times when I open up a policy and I go to the schedule pages, I look to see what riders may have been purchased or are attached to the policy and then those riders themselves are not in the schedule, there's just a summary of, hey, you bought this rider, you bought that rider and cost this much money. And it usually has a number and maybe a state reference to it and then I can go look for those riders to see what they are when I'm looking at a policy. So a lot of times when I look at a policy, that's how I'll start. I will look at the summary of coverages and benefits and declarations pages, the effective dates of coverage and whatever riders there are. And then I'll go look for the riders because a lot of times the writers will modify some of the terms that are contained within the body of the policy.And I want to know what those changes are before I look at the policy. And that's just one way that I like to look at them.

  Now, what else is attached to the policy? Well, depending on what type of policy it is, most policies will also have the application and application related documents attached to it. And I can tell you that when it comes to certain types of policies in certain states, because the application is often part of the policy, it needs to be attached to the policy and there are legal implications if it is not attached to the policy. So that's usually at the back of the policy where you'll see the application as well as application related documents. Perhaps, that'll be at the very end, although sometimes there may be a rider or two thrown in after the application at the end of the entire package of the policy.

  So, so far, what do we have? We have the schedule pages or declarations pages. We have the riders and endorsements, and we have the application and the application related documents. So those are three out of the four things that are typically in a policy before you get to the meat of it. The next thing is the meat of the policy and basically insurance policies contain an insuring agreement which is basically what the insurance company says they will insure, what they're going to pay for, then they'll be conditions, and the conditions are what the insured needs to do in order to obtain the benefits that the policy insures. And there will also be exclusions and exclusions will tell you what's not covered by the policy. So that's the meat of the policy and the language that anyone looking at an insurance coverage matter needs to make sure they have in their possession and then they've reviewed when they're assessing most insurance recovery problems that present themselves to lawyers, right?

  So the meat of it's going to be the insuring agreement, the conditions, and the exclusions. And so what do you have? You have your schedule pages, your riders, your application, and related documents, and then the heart of the policy, insuring agreement, conditions, exclusions. And that's basically what you're going to see in most insurance policies when you're looking at them. So just to understand how they're broken out, this gives you a general idea of what you're looking at whether it's first party coverage, whether it's third-party coverage, whether it's both. That's what you're going to be looking at.

  Okay. So the next thing I want to talk about is interpreting insurance contract provisions and understanding what you need to do when you're thinking about the language contained in policies and many litigation and most litigation revolves around interpreting the language contained in insurance policies. So when you are in insurance recovery litigation some court is going to have to interpret most of the time something in that policy, an exclusion, a condition and a part of the insuring agreement, something that was on the declaration or schedule page, something that was in a rider or endorsement.

  So as an example, when I was working for the large firm doing environmental insurance coverage defense work, defending insurance companies for claims by corporations for environmental contamination, investigation, and cleanup of the entire country, every Supreme court or every of the highest court of every state in the country had to interpret an exclusion that was contained in most general liability policies called the pollution exclusion. And the pollution exclusion excluded pollution except in cases where the pollution was sudden and accidental, sudden and accidental. Those three words, sudden and accidental were in interpreted by the highest courts in every state in the United States because if they deemed the events, the pollution events to be sudden and accidental, the exclusion did not apply and subject to any other aspects of the lawsuit, the losses which were in the hundreds of billions of dollars across the United States were going to be covered.

  And that's why those words, sudden and accidental were litigated for years all over United States and the highest courts in every state had to interpret what they've viewed sudden and accidental to mean in the context of the pollution, exclusion in these general liability policies and in the context of the facts of the particular case, right?

  So just to give you an example, to understand the context of which that comes up, you're a dry cleaner and you've been using dry cleaning fluid for years, and it's something called perc, perchloroethylene. And over the years it leaches into the groundwater and poisons the groundwater and creates an environmental hazard that requires a cleanup. The question would become, was that leaking of the perc into the ground covered or excluded by this pollution exclusion, was it sudden and accidental or not, and believe it or not different courts came to different conclusions on the factual scenario I just explained to you all over the United States. And a lot of times the circumstances under which this would come up and be argued was it perc from a dry cleaner, it was a landfill, I remember a case I worked on foster grant, had giant ponds at their facilities in Baton Rouge, Louisiana that were filled with resin that was deemed to be toxic, that didn't actually leach into the groundwater but the sites were toxic in and of themselves. And the question what was that and was that sudden and accidental.

  And in addition, and it's a good way to simplify these issues, so there were three issues litigating the environmental cases. That's a great way of demonstrating conditions, insuring agreement and exclusions. So a general liability policy generally says that they cover occurrences and occurrences are accidents and accident has a specific definition in the policies, although it's vague. But the insurance companies will argue that the pollution was not accidental and therefore it was not an occurrence within the meaning of the policy and therefore the claims for cleanup from these polluters was not covered under the insurance policies because the insuring agreement did not cover their losses because they weren't occurrences, they weren't accidents. And so that got litigated all over the country. And again, it depended on what state you were in.

  Next, they said, hey, you were doing this and polluting for 20, 30, 40 years. So you were polluting for many, many years, and you didn't tell us about this for 25 years and therefore the condition of the policy that you give us notice was violated. And we don't have to cover these late notice of claim, late notice of suit. So the policies themselves have a requirement that you notify insurance companies when you have a claim and the law interpreting those has changed over the years in just about every jurisdiction. But every state has its own rules about when an insured has an obligation to notify their insurance companies that they have a claim. So though that was another fight, number one, this wasn't insured under our policies. Number two, late notice, you didn't tell us about it. And number three, they're barred by the pollution exclusion.

  So all three of those issues were so highly litigated. So you had massive litigation all over the country, and it covered all three of the standard parts of the coverages and how they work under an insurance policy. So moving back to the interpreting insurance contract provisions, I use this example because it's a good example of some of the rules that exist in interpreting insurance contracts that don't exist in interpreting contracts in general in other aspects of the law. So here's one that does overlap. The first one is something called the plain meaning doctrine. So most courts will say, hey, we're going to look at the words of the insurance contract, and we're going to interpret them based on their plain meaning. So if we court think when we read those words, that they make complete perfect sense to us and they're not subject to a bunch of varying interpretations, then that's where we're going to say it means and that's the end of the story.

  Now, that's true in other contracts as well. So that's the one overlapping area. Now, when you move into the other areas of insurance contract interpretation, they generally favor insured over insurance companies. And one of the reasons for that is most insurance policies are defined by courts as contracts of adhesion, meaning you get what you get. The insurance company decided what you were going to get, and you didn't really have a choice in the matter other than buy it or don't buy it. And because of their greater bargaining power, their greater sophistication, and the fact that they wrote it, the insurers don't you get the benefit of the doubt in a lot of ways in interpreting them when they get to court.

  So the first rule that benefits the insured is something called the reasonable expectations doctrine. And that's where courts will look at the objective views of what a reasonable insured would have expected they were getting from the policy when they bought it. And if the language can be interpreted in a way that meets the insured's reasonable expectations, that is not consistent with what the insurance company is arguing. A court is more likely to adopt that interpretation.

  Another one is something called the Contra insurer rule or Contra Proferentem. And that basically means, if the policy language is vague or subject to varying interpretations, then the court will take the interpretation that most favors the insured and not the insurance company. So the insurance company is getting punished for not drafting the insurance contract specifically enough and that benefit goes to the insured. So those are two major doctrines that are often applied across most states to benefit insureds rather than insurance companies and the problem or the difficulty that insurance companies have in this is they need to write policies in a uniform way to meet all the requirements of all the state laws in every state so they can sell the policies and the policies need to have certain flexibility.

  So by definition, a lot of times the language contained in insurance policies is vague or is not clear on certain things. And so the insurance companies are in a bit of a language conundrum when they're preparing products and selling those products. Now, obviously I'm not here to say poor insurance companies feel bad for them, they're doing just fine. But this is just an understanding of why they are written this way and then the rules as to the benefit to insureds when they get to court and the courts are interpreting that.

  There's another general rule out there in most states which talks about how to interpret exclusions. And a lot of states will say, if you insurance company want rely on an exclusion contained in your policy to deny coverage to this insured, you have the burden of proofing to the court that the factual scenario presented falls wholly and completely within the exclusion. If it bleeds over into a potentially covered area in the policy and outside the exclusion in any way we're going to hold the exclusion does not apply. And that is another rule of insurance contract interpretation that benefits the insureds and against the insurance company.

  So those three rules, I think... Once you get past the plain meaning doctrine, you have the reasonable expectations doctrine, the Contra insurer rule, or Contra Proferentem and the rule concerning how courts will interpret exclusions. Those are three good general rules that are pretty consistent across most of the 50 states in insurance contracts interpretation.

  So when you're looking at policy language and you look at it yourself and you're like, that doesn't make sense to me, or that's vague, or how could that not be covered looking at the language, you're probably more right than wrong. And that is some of the issues spotting you can do when you're looking at an insurance recovery problem. Now, when you're looking at insurance recovery problem, I always say it starts with looking at the policy or policies in play. But in addition, most of the time when a lawyer is presented with an insurance covering problem, they will have the policy, and they will have a coverage position letter from the insurance company where the insurance company has said, we're not paying this claim. This claim is denied. This claim is terminated, or we're paying this but not paying that or we're paying this but in a lesser amount than the insured made a claim for.

  And so getting those coverage position letters along with any proof of claim that was submitted by the insured is generally along with the policy, the information that I want to see when I'm taking a preliminary look at a client's potential new problem, there may always be more but coverage position letters, proof of claims or proof of loss that was submitted by the insured and the policy are always an excellent starting point for evaluating an insurance recovery problem. Now, proof of loss or proof of claim. It leads us to the next topic here which duties of the parties under an insurance contract.

  So we've talked about a few of these things tangentially but what are the duties of the insured when the insured is submitting claim? Well, the first thing is, the insured needs to put the insurance company on notice. And depending on the circumstances, that's either going to be notice of claim, notice of potential claim or notice of suit. And when I talk about notice of a potential claim, again, everything starts with the policy. So there are notice provisions contained in the condition sections of policies that anybody who's dealing with a notice issue or notice problem need to see and read and know what they say and mean. So, as an example, legal malpractice insurance or lawyers E&O coverage, lawyers have a duty not to just provide notice of a claim but they have duty to provide typically notice of potential circumstances which might lead to a claim.

  And so that's a much broader obligation than just notice of a claim where a client says, "You screwed up. I demand you reimburse me for my losses." That one's simple but lawyers in the context of representing clients have things happen all the time. Sometimes they look like mistakes and may not be, sometimes they may have been a mistake but they're easily fixable and get fixed before anybody has to worry about anything. And a lawyer has to be sensitive to whether or not a situation has arisen in their firm where they may need to give their insurance company notice of potential circumstances. A motion came out really badly for my client and the way I read it, it looks like it was my fault for not doing X, Y, or Z that we lost this motion. Hmm. I wonder if I need to put my insurance company on notice of potential circumstances right now in case this develops later into a claim or a lawsuit.

  And so it explains the importance of knowing what's contained in your policy and knowing what you need to do. So duties of the policy holder or the insured, notice, notice of claim, notice of potential claim, notice of lawsuit or legal proceeding. If you get sued, if a proceeding is commenced against you or your business. The very first thing I would be doing is putting all insurance companies that I believe may potentially or tangentially be involved in this, that me or my company has, I'd be putting them on notice and sending them the complaint or the lawsuit or the proceeding and submitting it for defense and indemnification, right? So notice and doing it in a timely manner is really important, sitting on it for years can put you as an insured in real, real, real time jeopardy, okay?

  So it's important to know what's in your policy about notice and the timing of notice and it's important to make sure that you're sensitive to that when something comes up, I would also generally state, and this is a general statement, "But insurance is purchased to be used." There are a lot of people and businesses I know that will say I'm not giving this claim to my insurance company because I don't want my premiums to go up. And my general rule there and my personal view is, well, what'd you buy the insurance for if you're not going to submit a potentially covered claim? Now, all right, there's a big difference between your kid gets in an accident and there's a scrape on the car, your deductible was $1,000 and you decide you want to give the other person $250 and they want to take it and you get a release and nobody's the wiser.

  I'm not advising anyone here to do that because most insurance policies require you to give notice, but practically speaking I know a lot of people do that and I'm not going to comment on the right or wrong of that here. I know it happens, but when things get a little bit larger and they're into the thousands of dollars and they're well beyond the deductible, not submitting them to the insurance company for coverage, I would respectfully suggest is not a good approach in general, most of the time. Okay. So timely notice and the type of notice.

  Once you've given insurance company notice, they're all going to ask the insured to prove up the claim, they send forms. They say, please send us proof of claim or proof of loss, okay? Proof of your loss. We know what is the nature of your loss? How did it happen? When did it happen? How much is the value of your loss if it can be valued depending on what type of claim it is, right? And so you have a duty, you have to give your insurance company notice. You have to provide them with proof of loss, and then you need to corporate with them in their evaluation of the claim whether it's payable and for how much they believe it to be payable.

  Now in the property and the property damage world, cooperation includes financial information. So for example, not only proving up what your loss was but if the insurance company asks you for financial information like tax returns or other things, withholding them could result in a denial of your claim, and you may never ever get a dollar from the insurance company because that's part of your obligation to cooperate, okay? In addition, property policies, especially auto and homeowners policies as well as other policies will contain a requirement that an insured participate in something called an examination under oath if such an examination is requested by the insurance company.

  And an examination under oath is typically where they hire a lawyer to ask you questions under oath with a court reporter present to try and get information about the loss. If you as an insured refuse to participate or go to that or just don't show up, your claim is going to be denied and you're not going to get any money. So the need to cooperate, appear for any UL, provide the financial information the insurance company is requesting. Generally speaking, if you don't do that, your claim is gone. So be aware of the need to cooperate. So what do we have? We have notice, we have proof of loss, we have cooperation, okay?

  Those are the primary duties of an insured and in a liability situation one of the other things that insured cannot do under most policies is pay any portion of the claim because there is a provision called voluntary payments which is not permitted by the insurance company. Once the claim is in, they have the right under the policy to compromise and settle a loss for any amount that they want to settle up to policy limits. And if you voluntarily do something without their permission or authority, you're going to lose coverage.

  So it's three things you must do, which is notice proof of loss and cooperate and one that you mustn't do which is voluntarily pay a claim into the third party claim, okay? So those are your duties while the claim is open and pending, and then the insurance company also has its own set of duties, okay? The insurance company's duty is to timely respond when notice is provided. To timely give you proof of forms that they want filled out. They have a duty to investigate and to turn to the existence of coverage as well as the cause of the loss and the nature of coverage that may be available.

  They have a duty typically to pay undisputed claims or undisputed portions of claims in the event that they believe the claim is payable. So if your claim is for $500,000 and they only think it's worth $378,000 but they've already determined that $378,000 if it's payable, they need to pay the $378,000. They can't hold you up on the $378,000 try to extract a release out of you, or try to bully you into taking that and hold your money.

  Another thing and they need to do especially on bodily injury claims, third party bodily injury claims, they have to timely take a coverage position, explain the reasons for their coverage position, especially if they're disclaiming and not covering, and they have to notify all parties interested in the outcome of their decision if they're not going to pay the claim. And if they don't do that, in many states, they're going to forfeit a lot of their rights. In New York for example, if you don't timely disclaim on a bodily injury claim, or you don't timely notify or notify at all the plaintiff's lawyer or other interested parties, you will be deemed in court to have waived the conditions and exclusions contained in the policy.

  So the only defense you would have if you blow the disclaimer in terms of who you're notifying, or whether it's timely as an insurance company, your only defense would be that it's not covered under the policy. You could no longer argue that the insured breached the condition or the insurance claim falls within an exclusion. So that's a very draconian remedy for the insurance company not disclaiming and notifying the right people or disclaiming in a timely manner.

  So those are some of the duties of the insurance company which include timely providing you with whatever proof of loss documentation that they want you to submit for your claim, timely investigating and determining both the existence of coverage and the cause of loss and whether it's covered, paying undisputed claims or undisputed portions of claims, timely disclaiming and notifying proper parties and a third party bodily injury claim. And if they believe something's not covered, typically they need to reserve their rights to disclaim for other grounds which they can do generally or specifically. So that's duties, duties of both sides in an insurance recovery claim.

  Okay. We're going to move on to another topic which in insurance world is called trigger of coverage and trigger of coverage is a fancy term for saying that an event has occurred that is covered under the policy, right? So coverage is triggered by the event. You got in an accident and it's an accident that is covered by your automobile insurance policy, coverage is triggered, okay? Doesn't mean you've given anybody notice, doesn't mean it isn't excluded. So it doesn't mean that you've satisfied conditions or that it's not falling with an exclusion or anything else. It's just that coverage has now become potentially available because an event which is covered under the policy has occurred.

  So the first thing we need to think about in that is types of policies where a trigger of coverage is important. And there are generally two types of policies out there in the world, there are, occurrence-based policies and claims made policies. The importance of understanding the difference is, an occurrence-based policy really has no time limit. As long as the occurrence or the accident took place during the policy period, it doesn't matter if a lawsuit or proceeding or some claim shows up 20 years later, right?

  That's where the environmental insurance recovery cases were so problematic for the insurance companies because you had a toxic dumping and toxic leaking going on for 20, 30, 40 years or longer, and the insurance companies had all these general liability policies that they had issued over the years to these corporations. And even if they had stopped insuring them, if someone could make an argument that the coverage was triggered because the poison was leaking into the groundwater in 1974, in 1968, in 1979, when that occurrence-based policy was in force, then I have triggered coverage because I have a loss, environmental contamination that arguably occurred during the policy year of that particular general liability policy. And so potential coverage was triggered year after year after year for decades for these policies.

  Now, that's not going to happen in a claims made policy. The claims made policy is where the claim needs to be made during the policy period. So if I made a mistake that I wasn't aware of in 2017 but I get sued in 2021 and I tender that to my insurance company, the only coverage that I'm going to have is the policy that was enforced during 2021, the policy that I had in 2017 or 2017/18, it's not going to cover it because these insurance policies say that the claim has to be made during the policy period. And quite often they say that they not only need to be made against the insured, but the insured has to report it to the insurance company within the policy period. And they call that claims made and reported.

  So claims made and reported policies or claims made policies are typically your E&O policies, your D&0 policies, your EPLI policies, these professional policies and employment practice policies, they're not occurrence-based policies, they are claims made policies so it's when the claim is made and when the claim is reported, okay? And obviously there's an interplay with notice and when notice is provided as to what's going to be impacted. So the duty to notify never goes away but when the claim occurred and what coverage may be available is very different if you have a claims made policy versus an occurrence-based policy. And generally speaking, an occurrence-based policy could go back years and years and years and that's usually like a general liability policy, the BOP policy that you buy for your office, the business owner's protection policy.

  Now, something else that's interesting is, in the world of late notice when it comes to long-term disability and long-term care policies, those policies generally speaking are ongoing monthly claims for benefits. So you're not getting a lump sum, you're entitled to a monthly long-term care benefit or a monthly long-term disability benefit. So if you became entitled to benefits in 1998 but you didn't tell the insurance company about it until 2010, in many states, you may forfeit the benefits that led up to the time when you gave notice of claim.

  So in some states you may forfeit that, but you'll be entitled to the go-forward if you could prove you're entitled to it. And in some states, they may allow you to notify them late, provided you can prove up through documentation all the information needed to show that you met the definition and triggered coverage under the policy back 10 years earlier when you never notified the insurance company.

  So that's going to be dependent on state law but it's interesting that there are monthly benefits and so the go-forward, if you notified somebody now of the claim and the claim was 10 years old, you will most still likely be entitled to benefits from now going forward assuming the policy still provides for them but you will you may or may not be entitled to the benefits for the past depending on the state law and depending on the proof of loss that you have available to the insurance company when they realize you're trying to go back 10 years with this claim. So it's a different of trigger. It's more of almost like an ongoing monthly trip.

  All right. So now you've got some of the basic ideas of an insurance recovery matter and what to think about and what to look at as you are evaluating the insurance policy, what you need to do and understand about insurance policies, what your duties are on behalf of an insured or insurance company. And now we're going to move a little bit to thinking about litigation and at least the very first thing I'm going to tell you can also apply to a claim but I always say, when you're about to file a lawsuit in just about any matter but in particular insurance recovery matter, and depending on the nature of the suit, you want to make sure you know who your client is.

  So whether they're corporate or individual, you should be investigating them yourself to a certain extent. A social media search and internet search, a Westlaw search, a corporate status, a licensing status, to make sure that you have a proper client that isn't going to have any problems before you go into it, that you fail to address with the client or that are later going to become a problem for you that you didn't know about. So is your client a corporation properly licensed to do business with the state you were about to commence the lawsuit in and what's their corporate status. Are they active or inactive as an example.

  If you've got individual clients or business clients, doing a basic internet and Westlaw search along with the social media search could tell you a lot about things you may need to think about and discuss with your client before you file the lawsuit. And they may have an impact on the claims process. So knowing your client and do a little research on your client is not just a bad idea, I believe it's necessary.

  So that's the first thing, but when you're going to sue an insurance company or an insurance company is going to sue your insured, one of the first considerations that I look at is, okay, I'm going to bring this lawsuit against an insurance company because I don't represent insurance companies I only represent at my firm, only represents business and individual insurance. So where am I filing this case? Am I finally in federal court or am I finally in state court? And in what state am I filing it? And what state's law may apply to it, okay? Those are always really important questions to think about when you're getting ready to file a lawsuit against an insurance company on behalf of an insurer.

  So federal versus state court, generally speaking, most plaintiff's lawyers or lawyers representing insureds rather than insurance companies, want to bring their cases in state court and on the opposite side of the fee, the insurance company lawyers want to bring the case in federal court. Now, it's hard to keep a case out of federal court if there's a basis for federal jurisdiction in federal court. And my experience is if the insurance company can bring it from state court to federal court or remove it, as we say, they're going to do it.

  They like federal court. They like the fact that the juries in federal court have to be unanimous. They like the fact that they're going to get expert depositions and expert disclosures in federal court that they may not get in state court. They like the breakdown of the jury pools. They like the fact that there's no jury unanimity, I mean, there is a jury unanimity requirement in federal court. The jury has to be every member of the jury has to vote in favor of liability or no liability. Whereas in state court many times that's not the case and I know in New York, it's not the case. You only need five out of six jurors to agree in order to get a victory and it's easier to get most than all as a plaintiff, as an insured.

  So if they could be in federal court, they're going to be in federal court. And if you're thinking about filing this, if you know they're going to remove the case, it's just going to cause your time and money so it just better to file it in federal court and be done with it, just depends on those circumstances, okay? And then speed of the process, federal court seems to be moving faster in the pandemic and state court typically has over the years but that's just something else to consider when you're trying to choose federal versus state court.

  Now, causes of action. Well, this is really a state law creature. Generally speaking, every state's going to recognize that you have a breach of contract claim if you bring a lawsuit against an insurance company for not paying benefits under a contract, you're going to have a contract then. The other claim that you're most likely to have is what's called a declaratory judgment claim where you're asking the court to declare the rights and obligations of the parties under the insurance policy as it applies to the factual scenario you have in front you.

  So breach of contract and declaratory judgment are pretty standard causes of action to consider when you're bringing a lawsuit against an insurance company. Moving into the other areas now talking about, well, what about extra contractual remedies or things you can get beyond what's available to you under the contract. And that's where you move into consumer statutes, bad faith and things of that nature. Now all of those types of contractual remedies like bad faith or punitive damages or some statutory or regulatory violations are creatures of state law.

  So number one, does the state's law that applies to your insurance recovery dispute contain those extra contractual remedies or not. A perfect example here is California versus New York. California has unbelievably good, extra contractual remedy law, bad faith, punitive damages, attorney's fees, etc, New York has none of them. And so you really have to know what state you're in and what state's law is going to apply before you are able to determine what causes of action you're going to be able to plead any complaint against an insurance company for improperly denying or otherwise contesting a claim.

  And I can tell you that that can get even more interesting because certain states that have bad faith will recognize bad faith as a tort rather than a contract claim and you could possibly be in a scenario where the interpretation of the insurance contract will be under one state's law but the bad faith tort might be under another state's law. So if your client had the policy and lived in Michigan, for example, and moved to California and the claim was denied in California, they may have a bad faith claim under California law and a contract claim under Michigan law.

  So this can get complicated and it is something that we're not going to get into in greater detail here but understand that you're going to in one of these litigations have real considerations about what court to bring it in, what state's law applies and whether and to what extent you can plead any extra contractual remedies beyond your straight breach of contract as well as your declaratory judgment action, okay?

  All right. So some general rules about insurance recovery litigation to think about. Once you filed a suit, if you're in a third party liability claim where your client has been sued and the insurance company is not covering the suit or some third party has made a claim and the insurance company is refusing to cover, well, you've got two parts to a third party liability claim. You have your litigation coverage and your indemnity coverage. Your litigation coverage is where the insurance company hires a lawyer and pays the lawyer to defend the lawsuit against your insured.

  And the second part is the indemnity. If there's to be a settlement or a judgment or a verdict where the insurance company pays up to the policy limits, when an insurance company refuses to defend or indemnify, it's important in the world of insurance law and insurance lawyers, to understand that the duty of an insurance company to defend their insured versus whether or not to pay indemnity is very, very different on how the law interprets it. The law in general, across the 50 states holds that the duty to defend the insured is far broader than the duty to indemnify. And basically what you're supposed to do as an insurance company is look at the lawsuit, look at the allegations of the complaint, compare them to the insurance policy and determine whether or not you believe anything alleged in the complaint is potentially covered under the policy even if ultimately it would turn out not to be covered.

  If it's potentially covered, then the insurance company is supposed to provide a defense. So even if they send them a letter to the insured and say, hey, we're going to defend this, but we're reserving rights to disclaim on indemnity for X, Y, and Z reasons. That's fine. But many times they just deny both. And many times I get into a case and I say, wait a minute, this could be covered under this policy. I can understand why they think it may not be covered but it could be covered and the insurance company owes my clients a defense, and I can go in to court and I have a much better and earlier chance of forcing the insurance company to do defend than finding out whether or not they have a duty to indemnify.

  And so that's another consideration is, if they're not providing a defense, okay, then you really need to look at the complaint as against the insurance contract and go, is there anything potentially covered here that could be covered if the brakes went the insurance way and in that case you've probably got a strong argument for coverage.

  Now, just a couple of other thoughts, because I'm going to run short on time here, generally speaking, if you're a policy holder, you want a jury when you're litigating one of these cases against an insurance company. Juries in general, don't like insurance companies and think the insurance company has taken premium and then is not helping out the insured at a time of need. So there's just a bias in juries towards insurance companies. So most of the time, if you are going to file a lawsuit, you want to request a jury in federal court or do whatever you need to do to request a jury or ensure that you're going to get a jury in state court, again, that varies depending on where you are.

  And finally, as a policy holder, you're going to look for specific ways to prove up your case, because you're going to have the burden to prove coverage. The insurance company does not. In the first instance, you're going to have to prove this is covered, okay? And if the insurance company then says, okay, you have an argument that it's covered but it's excluded. They're going to have the burden to show that it's excluded. Another example, i the insurance company says that the insurance claim is not payable because of fraud, they, the insurance company will have the burden of proving that fraud by clear and convincing evidence. So important to remember that if you want coverage on your policy, you, as the plaintiff's lawyer for a policy holder is going to have the burden of proving that your client's claim is covered in the first instance.

  All right, there's so much more to talk about it in the wonderful world of insurance but I think that is good for the basic ideas of understanding the different types of insurance policies, the insurance contract interpretation issues, things to think about before and during the litigation. I've been happy to provide you with this information. I hope it helps you and Quimbee will be providing you with my contact information if anyone has any questions. Thank you for being a patient audience and I hope this is helpful to you. Take care. Goodbye.

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