No company likes to be sued. Perhaps the only thing worse is to be sued and to find out that the insurance you thought would cover the type of claim you now face won’t because the insurance you have was not intended to cover that type of claim, or the insurer has asserted some vaguely-worded exclusion that you’ve never heard of.
How can you avoid this all too common scenario?
First, long before any claim arises, the prudent company will work with an insurance professional to identify the risks that the company faces — where it is vulnerable to suit — and then identify the insurance products that can be used to manage that risk. Companies vary widely in their risk profiles and, consequently, each has its own needs. The company’s insurance coverage must be structured to provide coverage for the risks it faces: otherwise, it almost certainly will face unanticipated uninsured exposures.
Second, when a claim arises, you should reach out to your insurance professional and promptly notify those carriers whose policies may provide coverage.
Third, after the carrier is notified of the claim, it will either accept coverage — sometimes with reservation or rights — or decline coverage. If the carrier declines or reserves rights, then it is time to meet with a lawyer who has insurance coverage experience. For better or worse, many insurance policies are drafted in a manner that there is often an apparently plausible basis for denying coverage — which although plausible is not correct. Determining whether to pursue coverage through threats of a lawsuit or a lawsuit will require careful review of the insurer’s denial letter, an analysis of the policy language, and familiarity with the applicable judicial precedent construing the provisions at issue.
For example, here in New Jersey, the judicial interpretation of coverage for “faulty workmanship” under the commercial general liability policy has been recently revisited to the benefit of the insured. Under new case law, our courts have overruled prior interpretation of the commercial general liability policy — which relied on broad generalizations about the purpose of such policies — that limited coverage even where the language of the policy would produce a result favorable to the insured. Instead, our courts have recently re-emphasized the primary important of the policy language itself in determining what is intended to be covered and what isn’t covered. Because New Jersey courts have traditionally examined policy language in a light favorable to the insured, the change in judicial methodology should result in more favorable coverage decisions from New Jersey courts.
One final note: under the New Jersey court rules, where an insurer incorrectly denies its insured coverage under a liability policy, a judicial decision declaring that the claim is covered will also result in an award of attorneys’ fees. In other words, if the insured prevails not only will the insurer be required to provide coverage, but also pays for the attorney’s fees that its erroneous denial caused.
For more information on the full range of services that BMK can provide for you, take a look at our areas of practice, or feel free to contact us at (973) 376-0909.