Exploiting your insurance coverage depends entirely on pressing your rights in the face of an insurer who systematically seeks to avoid payment. The stakes can be huge, especially when your policy includes a "duty to defend" provision. In that case, the insurer's defense obligations are unlimited, meaning that — irrespective of the policy's face amount — the carrier must pay for your defense lawyer and all reasonably related litigation expenses until the claim is resolved either by settlement or judgment. It also includes costs of appeal. If the defense takes years (or even decades), so be it. The insurer must pay.
Below are five tips for webmasters to consider:
Hire a broker. A good broker will provide you with invaluable advice and insight regarding your business exposures and all available coverage out there to protect you. A broker will negotiate pricing and terms. Best of all, a broker's obligation is to find you appropriate coverage. If through mistake or inadvertence your broker fails to do his job, the broker has his own coverage to respond to your gap in coverage. Think of it as insurance against being uninsured.
Tender the claim. This is where it all begins. The mere act of sending the insurer a "claim" — be it a threatening letter or a copy of a lawsuit — triggers the insurer's obligations to investigate and respond by way of a formal coverage opinion. That response, due in 60-90 days, will provide you with a legal/factual statement of the insurer's stance tied to the specifics of your claim. It also will provide you with a roadmap for determining what additional information may be needed to trigger coverage. The tender date also is critical for assessing the insurer's payment obligations, which, if you later "prove-up" coverage, will be backdated to when the carrier was first notified of the claim.
(Note: Where to send the notice of a claim is designated in the policy. Your broker can also handle this for you.)
Put it in writing, set and enforce deadlines. Whether dealing with your broker or your insurer, put everything in writing. Set reasonable deadlines for responses and follow up. Religiously. After every telephone call, confirm the contents in a brief letter or email and invite the recipient to respond if you misstated or forgot anything. Insurers are required by law to respond within a set time frame to policyholder inquiries. Insist on answers. If a deadline passes without response, write a note to remind the insurer that an answer is owed. Build your record.
Don't take "no" for an answer. An insurer's first response to any claim is (invariably) "no." Don't accept that answer. Press for explanations and send follow-up / additional information that supports your claim. The fact is that claims change over time.
As the result of correspondence such as amended pleadings, document exchanges and depositions, additional facts often develop that clarify or trigger coverage. Unless you keep pressing the insurer and continuously provide additional information, you may fail to send in key information to unlock policy benefits. Since, as noted, benefits often apply back to the original date of tender, consider this tactic a long-term investment.
Sue. In most jurisdictions, the standard for triggering policy benefits is extremely light — the mere "potential" of coverage is sufficient to require an insurer to provide a defense.
Moreover, such assessment is made on the basis of alleged harms, with coverage applying even if the claim asserted is indisputably groundless, fraudulent or false.
Given such standards, an experienced coverage practitioner can quickly assess whether you're being ripped off by your insurer. If that's the case, sue. In many states an insurer's failure to provide timely and complete policy benefits gives rise to an independent tort and the potential of punitive damages and payment of your attorneys' fees for prosecuting your right to benefits. Insurers beware.
