By John L. Watkins, Partner, Barnes & Thornburg LLP
As an insurance coverage lawyer, I am often asked to assist other lawyers in dealing with insurance issues that affect their clients. Insurance coverage is not intuitive. In many instances, counsel may not realize that a claim or dispute is covered, or potentially covered, by insurance. When potential coverage is identified, generalists or persons who practice in other areas may believe they can handle the coverage issues because, after all, an insurance policy is just a contract.
Although an insurance policy is just a contract, it is a very specialized form of contract with a very specialized body of law applicable to the contract. Perhaps equally importantly, knowing how to approach an insurance company can be just as important as analyzing the legal issues. The following paragraphs will briefly discuss some of the ways in which a coverage lawyer can assist other lawyers in helping their clients.
Corporate lawyers. Corporate lawyers are often the first point of contact for a client, and are often the first to know about a claim. Before routinely referring the matter to a general litigator, it is a good standard practice to determine whether the claim is or may be covered by insurance. It is very important to check at this point because, although the law varies from state to state, failure to provide timely notice of a claim to a carrier can be a ground for contesting coverage.
Corporate lawyers should also understand that, even if there is a potential coverage issue, the bar for providing a defense (the "duty to defend") is typically much lower than for paying a claim (the "duty to indemnify"). Thus, even if there is an arguable coverage defense, a carrier can often be convinced to defend a claim, thus potentially saving the client thousands of dollars in legal fees.
Environmental lawyers. Despite the adoption of the "absolute pollution exclusion" in most 1986 liability policies, it is still often possible to find coverage for environmental claims. Because pre-1986 policies were written on an "occurrence" form, it may be possible to trigger older policies with respect to events that occurred many years ago. For more modern policies, state law differs on what constitutes a "pollutant." Finally, many modern policies include an element of environmental coverage (such as for clean-ups of spills), although the amount of coverage may be limited. Finally, more sophisticated insureds are beginning to carry environmental coverage. Because of the potentially significant costs that can accompany an environmental claim, environmental lawyers should consult with coverage counsel as soon as they are aware of a potential claim.
Defense counsel. Most tort and product liability cases are handled by insurance defense counsel who are appointed by the defendant's insurer. Insurance defense counsel usually are not in a position to advise a client regarding insurance coverage issues because they are being paid by the carrier. If insurance coverage issues arise, or if an insurer's claims adjuster does not recognize the risk of a claim, the insurance defense may need to refer the insured to insurance coverage counsel.
In such circumstances, insurance coverage counsel can often help resolve the issues, and, most importantly, protect the interests of the client. In such circumstances, brief communication with the adjuster by telephone or email may be sufficient. Sometimes, an adjuster's attitude will improve immensely simply by virtue of the fact that someone not beholden to the carrier is taking a second look. If necessary, coverage counsel can also take more aggressive action, such as writing a "hammer letter" demanding that the insurer take action to protect the insured and resolve the case. A hammer letter will be most credible if it comes from an attorney with considerable insurance coverage experience.
Plaintiffs' counsel. Plaintiffs' counsel in tort and product liability cases typically work on a contingency fee basis and recovery often depends on the availability of insurance coverage. In some instances, carriers will sometimes use coverage issues to try to drive down the amount of a settlement. In such instances, it may be worthwhile to consult with an insurance coverage lawyer. Quite often, the coverage issues are not as represented by the carrier, or there may at least be a substantial gray area. Being able to counter the carrier's argument may be the key to unlocking a larger offer.
Conclusion. The reality is that insurance issues influence a large percentage of the cases litigated in the U.S. Insurance companies have an army of in-house and outside lawyers to advise them. Insurance companies often take very aggressive (or at least self-serving) positions based on the obtuse and ambiguous provisions of their policies. Most lawyers who do not regularly practice in the area of insurance coverage are not well equipped to deal with the insurers' group of specialists. Involving experienced coverage counsel can help even the playing field.
John L. Watkins is a partner with Barnes & Thornburg LLP in Atlanta, Georgia. Mr. Watkins practices primarily in the area of litigation, with an emphasis on insurance coverage matters and matters involving trade secrets and confidential information. With respect to insurance coverage, Mr. Watkins currently represents policyholders in coverage and bad faith litigation with insurers. In the past, Mr. Watkins has represented insurers in such claims. Mr. Watkins has been involved in coverage matters involving losses ranging several hundred thousand dollars to several hundred million dollars in Georgia and many other jurisdictions. Mr. Watkins received his law degree from the University of Georgia, summa cum laude, and has practiced for over twenty-five years.
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Well said, John. As an insurance coverage lawyer I am often amazed by what lawyers who are not familiar with insurance do to the detriment of their client that could have been avoided by a simple inquiry to a coverage lawyer.
For example, I once had a lawyer come to me after defending a client who injured someone on a golf course and never reported the claim to the homeowners insurer because the accident did not occur at the home because he did not read the policy to find it provided full liability cover. When reported the insurer immediately assumed the defense.