Over the years, we have seen some crazy defenses raised by insurers attempting to limit their exposure for corporate insurance claims. Most are laughable when raised, but that does not stop insurers from pushing them.

Several examples illustrate this point. In the 1990's the insurers came up with the idea that general liability policies do not cover injunctive relief such as environmental cleanup orders. Why? Because, according to the law of England, in place long before anyone on this planet was born, there was a difference between courts at law and courts at equity. No matter how crazy this idea now sounds, insurance companies litigated this issue for decades. Later, with the proliferation of claims-made coverages (the norm for D&O and E&O policies), insurers came up with an even crazier idea – that long since established "duty to defend" standards did not apply anymore. Why? Because the insurers claimed that their duty to pay for defense of a lawsuit was fundamentally different from their duty to defend and pay for an underlying lawsuit. As crazy as this sounds, insurers have been pushing this idea, and more litigation to address this issue is likely to follow.

We raise these examples to illustrate a fundamental observation about high-end insurance company lawyers. They are always thinking up new ways to deny coverage. They push the envelope by continually offering their clients (insurance companies) potential solutions to minimize loss.

We also raise these examples to illustrate how many in the insurance business respond to these crazy defenses. Rather than go on common sense, we see a lot of folks, lawyers included, giving credit to these crazy defenses, rather than calling them out for what they are – complete nonsense.

Recently, we came across a shocking new defense. We call this one the "it's not over defense." This defense comes up in the all-to-common scenario where a corporate policyholder is subjected to a series of pending claims. Let's say there are twenty lawsuits for which coverage is sought. One of those lawsuits is going to trial, and the judge is pushing for settlement. The parties go to mediation, and reach what they think is an acceptable resolution. But, when the insurer is asked to contribute, the insurer says, we can't, because we don't know what our overall exposure is, given that 19 lawsuits remain.

Please watch the video to learn more.

Below is a transcript of today's video:

The Craziest Insurance Defense Ever

The craziest insurance defense ever. Now I think about ... we see all kinds of insurance defenses, these are defenses insurance companies throw up to paying corporate insurance claims. Some of them are just laughable, others are "wow I can't believe somebody was able to think that one up". But the bottom line is you've got a bunch of lawyers sitting around in their office trying to make points with the insurance companies, trying to find new ways to deny claims. It's an industry. A lot of money is being paid by these insurance companies to have these lawyers think up new ways to not pay claims.

The craziest insurance defense ever and we've seen it come up repeatedly in recent claims and that defense is, "well we can't settle that claim because you've still got other claims out there". Look if you're a corporation and sometimes these claims, they come in waves, somebody sues you for a TCPA violation and then 20 different people sue you. So, you have 20 different claims. Somebody sues you for a securities claim and then you have four different securities claims in different jurisdictions, all of these with the plaintiff's lawyers competing on who's going to be the big dog and get the most money.

So, they come in waves. It seldom that you see one claim and that one claim is the only claim you have. But let's think about what the insurance company's saying. They're saying, "Well you have five claims, you can't settle these three because you still have two left." Now it's not in the insurance policy. There's no defense for that. It's not anywhere else that we can see, but it's something they're asserting. And the basis for asserting it is, well we just don't want to do it because we're afraid that these other claims might cost more money and we want to do a deal with you to pay you less than policy limits. So, it's not really a defense. It's more a posturing for settlement.

But the problem is what we're seeing nowadays is insurance companies are going to mediations and they're saying, "We're not paying anything, till we know what the universe of the claims is." And that's simply wrong and that's simply something that's inconsistent with the policy language. The insurance company has a duty to defend and they also have a duty to settle. They can't sit back and say, "We're doing nothing." And if they do, they're in a position of bad faith.

Miller Friel, PLLC is a specialized insurance coverage law firm whose sole purpose is to help corporate clients maximize their insurance coverage. Our Focus of exclusively representing policyholders, combined with our extensive Experience in the area of insurance law, leads to greater efficiency, lower costs and better Results. Further discussion and analysis of insurance coverage issues impacting policyholders can be found in our Miller Friel Insurance Coverage Blog and our 7 Tips for Maximizing Coverage series.

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