Insurance coverage disputes can be resolved

Even the best insurance companies make coverage mistakes and may deny a claim that may be covered. To whom should an organization turn if coverage disputes remain unresolved? One law firm that handles policyholder disputes is Anderson, Kill & Olick. At an April 2008 seminar in Phoenix, two attorneys from the firm offered solid advice to businesses that may face adversarial situations with their insurance carriers.

Here are the Michael Conley’s and Darin J. McMullen’s top tips.

• Put insurance-related communications in writing. Big problems, according to McMullen, usually start with small problems. Document conversations and follow up in writing. For example, if an adjuster asks for three pieces of documentation, send the documentation and then write, “Here are the items you requested. It is my understanding from our conversation of (date) that these were all the items you needed to settle the claim.”
• Keep all marketing materials furnished to you by the agent or broker in case a claim arises that is not covered. Ensure your organization has a formal records retention program. Policies, McMullen said, are like “money in the bank.” Keep policies safe. In addition, when you are named as an additional insured on someone else’s policy, obtain a copy of that policy, preferably a certified copy. Certificates of insurance offer some protection, but often coverage is not broad enough to cover every loss that could occur.
• Give notice of a claim or loss as soon as possible. Generally speaking, notice to your insurance agent is also notice to the company, but discuss any potential claims with your agent. “Err on the side of providing notice,” Conley said. Take the “belt and suspenders approach” by reporting any potential claim and say, “We have no reason to believe this is going to result in a claim,” but here’s what happened. Then, ensure the agent provides you with a copy of the notice to your insurance carrier. You can always, at renewal, argue that you had a few incidents, but they never culminated in claims.
• The duty to cooperate is not the duty to capitulate. Insurance carriers are entitled to “reasonable” documentation to evaluate a claim for settlement. Overbroad requests for documentation, especially in certain lines of coverage, may be a red flag. Ask your insurance carrier why they need that documentation. If you feel uncomfortable releasing it, seek expert advice.
• Reservation of rights (ROR) letters should raise a red flag. These are claims letters that outline the coverage issues that may exist and reserve the insurance company’s rights to investigate the claim but not admit to coverage. There may be several exclusions cited in the ROR. Examine them all carefully to determine which ones may apply. Although defense counsel is assigned to you by the insurance company, remember who pays that bill. Sometimes, warns McMullen, the attorney hired to defend you may try to “knock out the one count that can get you coverage.”
• Sometimes carriers will offer a “buy-back” of coverage in exchange for covering the claim. This waives your right to filing a future claim under that policy, so beware. If you’ve blown through your limits, then it may not be a problem. Examine any offer the carrier makes carefully to determine any future ramifications.
• Beware of arbitration agreements, especially those that may be arbitrated in other jurisdictions like England or the Bermudas. These provisions may significantly limit your rights under the policy, according to McMullen.
• If your insurance company becomes insolvent, don’t panic. File a proof of claim as a creditor and file a claim against your state’s guaranty fund in as many jurisdictions as are applicable. Always requested that any excess carriers “drop down,” Conley recommends. In some states, excess policies may be worded so that they will cover underlying losses if policy limits are “not available,” not just ‘exhausted.’
• Don’t accept “no” for an answer. “The devil is in the details,” Conley said, and in today’s electronic age, almost every communication is grist for the litigation mill. This includes e-mails, correspondence, promotional material, and prior court decisions that might impact your case. “The squeaking wheel” is one good approach he recommends. “People make mistakes all the time,” he continued. Often times, carriers’ adjusters are undertrained and understaffed and make the wrong decisions. So if you feel your claim has been denied unfairly, be persistent. “Determination and persistence often mean the difference between coverage and no coverage,” according to the firm’s handout.

Most businesses enjoy a great relationship with their broker and their insurance carriers. However, if you think coverage has been unfairly denied, it pays to take steps to ensure your claim is handled appropriately.