Real world business insurance question

Asked over 1 year ago - Weston, MA

How much influence does a business insurer have over whether their insured settles? I would guess if it were up to them they are going to be fairly mathematical about it, and weigh the odds, and costs together in determining a fair settlement offer. I would feel the strength of the defendant's case is a factor, but not the primary factor by any means.

It would seem to me the insured is in a terrible position if it is purely up to their insurers as I would imagine even settling a claim can make future renewals of insurance potentially unaffordable. And I would imagine just as with car insurance, that business insurers can share information about claims from specific entities or individuals, making it hard to find another reasonable insurer. Does a defendant have any protection from this?

Attorney answers (3)

  1. Thomas J Callahan

    Contributor Level 18

    1

    Lawyer agrees

    Answered . That's why you buy insurance - to have the insurer handle it. As Atty. Rubino points out, the insurer has every incentive not to expose you to an excess claim, and so to insure that any resolution is within the policy limits. Within the limits, it's the insurer's money, so it having control is not illogical. There are situations where companies are self-insured or where their insurance is self-directed. I worked under the latter system when representing a big corporation in asbestos litigation - it had outside insurance, but was allowed to direct its own defense. Both sel-insurance and self-direction, which lets the insured call the shots, is only available to very large businesses or very unique litigation, like asbestos. If you are a small business, I would not sweat these issues. Let the insurer do its job, and you do yours by making money, making sure you have enough insurance and the right type of coverage to protect your business, and making sure the need for insurance doesn't arise too often. I have no idea what information the insurance industry shares, but assume it is everything.

    To questioners from West Virginia & New York: Although I am licensed to practice in your state, I practice on a... more
  2. Herbert Warren Cooper IV

    Pro

    Contributor Level 14

    1

    Lawyer agrees

    Answered . This is a complicated question. A settlement won't necessarily mean significant increases in premiums - but speak with your commercial insurance agent about this. Insurers do have an obligation to provide legal representation for their clients, but it is usually done with attorneys selected by them. In some situations, where there is a conflict between insurer and client, there might be an obligation to pay for an attorney selected by the client, although it appears limited.

    Bear in mind the vast majority of settlements are concluded on terms where the insured/defendant specifically denies liability and the fact of a settlement is not to be construed as a determination of liability. As far as information sharing, that too may be limited. It would depend upon the nature of the information, whether it was already confidential or not, etcetera.

    If you have concerns about a specific situation, you may be more comfortable engaging your own attorney to review the situation for you (e.g. proposed settlement), under specified constraints.

  3. Terrence Marc Rubino

    Pro

    Contributor Level 14

    1

    Lawyer agrees

    Answered . the insurer has a duty to protect the insured from liability. this includes the cost of defense and if necessary settling within the policy limits. if the insurer does not and a judgment is rendered against the insured for an amount in excess of the policy limits, the insurer can be liable for the excess plus. this is because insurers control the settlement process. with doctors it may be different because some med mal policies require the doctor's consent to settle. the underwriting looks at the claim history. minimizing the chance for claims is perhaps the best thing you can do. i don't know what kind of buisness you have but, for example, trucking companies often hire safety consultants to review their practices. you sound sophisticated so perhaps this isn't shedding much light on the subject. good luck.

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