By Michael T. Sharkey
This commentary examines recent court decisions around the country that have held that subpoenas and other forms of government investigations are “claims” triggering coverage under various types of liability insurance policies. Decisions upholding the broad definition of “claim” to include various government investigations benefit policyholders by allowing them to recover from their insurance companies the costs of responding to those investigations, providing they give timely notice of such a claim to their insurers. The commentary points to court decisions that make clear that policyholders must be vigilant, however, or the very breadth of the definition of “claim” could lead an unwary policyholder to forfeit coverage.
The more proceedings that qualify as “claims” under a policy, the more proceedings a policyholder must report to its insurance company. The commentary considers cases where insurance companies argued that untimely notice of an investigation allows them to escape their coverage obligations not only for the costs of responding to the investigation, but also for any lawsuits that later arise from the same circumstances. The commentary amply demonstrates the importance of this cautionary note: policyholders should make sure that those in the organization who receive and respond to government investigations are aware of the need to review promptly the coverage and notice requirements of the organization’s liability insurance policies.
Indeed, the commentary observes that if "a policyholder provides notice of circumstances, the noticed policy would apply to any future covered claims arising out of these circumstances." On the other hand, the commentary provide a caveats that under some circumstances, which it sets forth, a policyholder may be better off waiting for an actual claim to come in before giving notice.
Michael T. Sharkey is a partner in the insurance coverage practice of Perkins Coie LLP, where he represents policyholders in insurance coverage disputes nationwide. The opinions expressed in this article are those of the author and not necessarily those of any of his clients. He can be reached at MSharkey@PerkinsCoie.com.
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