Do not assume insurance coverage is unavailable
Today’s insurance market is complex. It encompasses a wide range of insurance policies covering all manner of events and circumstances. Beyond more traditional coverage for personal injury or property damage (under commercial general liability (CGL) policies), companies now routinely purchase Directors & Officers (D&O) policies, Errors & Omissions (E&O) policies, and Employment Practices Liability (EPL) policies, among others. These policies can cover everything from claims of wrongful termination (EPL) to breach of contract (E&O) to shareholder class actions (D&O). Further, many CGL policies are “occurrence” based. This means that if the loss occurred during the policy period, the policy may provide coverage even if the claim is not made until decades later (presuming you recently learned about the loss). Accordingly, when you or your company faces a lawsuit, never assume insurance coverage is unavailable.
Immediately notice the claim to all relevant insurers
Beyond identifying potential coverage under existing policies, it is important to promptly place the insurers on notice of the lawsuit. A failure to give timely notice could result in a waiver of coverage. Many policies require the insured to give notice “as soon as practicable” or even “immediately” after learning about the occurrence (e.g., accident harming another’s person or property) or claim (e.g., a lawsuit). These policies often treat delayed notice as a breach of a condition precedent to providing coverage under the policy. The insurer will likely then deny coverage based on this breach. While most jurisdictions require an insurer to show prejudice from a delayed notice of an occurrence, claim or suit, some do not. Providing prompt notice avoids what could be a costly dispute, especially if the insurers succeeds in avoiding coverage. Therefore, even where you believe a lawsuit will resolve quickly, it is still imperative to give timely notice (and, thereby, avoid forfeiting the coverage purchased).