As far as lawsuits go, the only thing worse than getting sued in a class action is having your insurance carrier deny coverage for the situation. Here are four things you can do to maximize your chances of getting the insurance protection you paid for.
Give timely notice. In an insurance scenario, the worst mistake any business can make is to fail to alert your carrier about a new lawsuit. Most policies require timely notice and can deny coverage on that basis alone. What does that mean? As soon as you learn about an actual or imminent lawsuit, send letters to all your insurance carriers insisting that they provide you with a legal defense and indemnity. Even if they end up turning you down, you have lost nothing in the process.
Be very specific in your correspondence. Don’t send letters that merely tell your insurers about a legal imbroglio. Make sure you demand coverage, consisting of both retained attorneys and indemnity. In most states, the duty to defend is much broader than the duty to indemnify. That means, even if a carrier ends up not being on the hook for a judgment or settlement, it might have to pay for your legal fees. Those expenses can be exorbitant and might exceed the ultimate figures for liability or settlement.
Be creative. Insurance companies are notoriously resistant to providing coverage. No surprise there. But, if you hire a good lawyer with experience in this area, you might tip the scales in your favor. For example, in a recent decision in Missouri, Doe Run Resources Corporation, a mining company, was sued as part of a massive toxic-tort case in Peru. The company’s errors-and-omissions policy had an express exclusion for pollution injury. Nonetheless, a court found that coverage existed because the company’s insurance premium was calculated according to its mining output and the business could therefore reasonably believe that it had pollution protection. I’m not making this up. The argument seems crazy, but it worked.
Do not give up. Insurance companies are often reflexive in their coverage denials, hoping that you will go away quietly and leave them alone. But if your lawyers and you can come up with decent grounds why there should be coverage, do not take “no” for an answer. If your position is strong enough, you might be able to assert a claim for bad-faith denial of coverage. That will really get your insurer’s attention.