When a claim happens, be sure to give prompt notice of the claim to the insurance carrier. Often, notice is given through the broker or agent that sold the insurance. Many carriers accept such notice. However, it is a good extra step to check the policy and to see if it says to give notice in a particular way. If the policy specifies a way to give notice, comply with it.
After notice is given, you should receive a written acknowledgment of the claim promptly from the carrier. After the acknowledgment is given, write the claims professional and confirm that the carrier is on notice. Ask the claims professional to confirm that no additional notice is required.
Note: Some policies require that notice of an event that may give rise to a claim be reported. Check your policy. This may require reporting before a demand letter or other formal notice of a claim is made.
2. Forward Copies of All Demand Letters or Suit Papers to the Carrier
This is pretty simple: If you receive a demand letter or are served with process such as a summons and complaint, forward copies of the letter or suit papers immediately to the carrier. This is true regardless of whether the carrier is already on notice of the claim.
3. Make Sure the Carrier Assigns Defense Counsel
Most U.S. liability policies provide that the insurer has the "right and duty" to defend the lawsuit. This means the carrier generally must hire and pay for a lawyer to defend the case for you. Make sure that the appointment is made promptly. If more than a week has gone by since the suit papers were forwarded to the carrier, contact the carrier and ask who it has appointed as defense counsel. Insist that the carrier give you a straight answer.
Note: Although the carrier will select and pay for the lawyer, the lawyer defending the case is your lawyer and is bound to look after your interests in defending the suit. Make sure the defense lawyer keeps you informed. Ask to receive regular updates and copies of any reports sent by the lawyer to the carrier.
4. Cooperate with the Carrier
Policies typically provide that the insured has a duty to cooperate with the insurer. Generally, if the insurer asks for something, provide it. If the request seems unreasonable, ask the carrier why it is requesting the information. If you do not get a reasonable answer, you may need to engage insurance coverage counsel.
Note: The lawyer defending the case cannot advise you on this. This will require you to engage a separate lawyer with experience in evaluating and litigating insurance coverage issues.
5. If You Receive a "Reservation of Rights" Letter, Consult with Coverage Counsel
Insurers will often send what is called a "reservation of rights letter." A reservation of rights letter is sent unilaterally by the insurer, and does not require the insured's consent. In some states, insurers will ask an insured to sign a "non-waiver agreement."
What this typically means is that the insurer perceives some issue with coverage under the policy. The reservation of rights letter will generally spell this out with reference to policy provisions. Generally, the insurer will provide a defense under a reservation of rights, but is preserving the right to contest coverage at a later date, or perhaps even recover the costs of hiring a lawyer from the insured.
A reservation of rights letter or a request to sign a non-waiver agreement is not a cause to panic. However, if not a red flag, it is certainly a yellow flag. It is usually a good idea to consult with coverage counsel in such an instance. Counsel can advise whether to take further action
6. If You Receive a Denial of Coverage, Consult with Counsel
If you receive a letter denying coverage, you need to act promptly. If there is a lawsuit, you must act quickly to engage counsel to defend the lawsuit. All jurisdictions have time limits in which an Answer or response to a lawsuit must be filed.
You should also engage coverage counsel to review the carrier's position. You should not accept the carrier's determination as the final word. Some carriers are very aggressive in denying claims, and the reasons for denying claims are not always correct. Further, general legal principles require that insurance policies be construed in favor of the insured. This is so because insurance contracts are typically "adhesion" contracts, meaning they are written on forms drafted by insurance companies and presented to insureds on a "take it or leave it" basis. Insureds are often able to challenge coverage denials successfully.
7. Read this Disclaimer!
I am a Georgia lawyer. This guide is designed to provide you with general information in the event of a liability claim in Georgia that may be covered by liability insurance. This guide was written on October 7, 2009, and is not continuously updated and may be out of date by the time you read it. This guide does not constitute legal advice, which is given only in the context of an attorney/client relationship after giving specific consideration to the unique facts of the matter, including the specific policy language. Note that policy language differs and may require different or additional steps. The steps in other jurisdictions may not be the same. For specific advice, consult with an attorney licensed to practice in your jurisdiction.
Additional resources provided by the author
Our blog posts on Liability Insurance 101 are available at www.ctflegal.blogspot.com in the posts for September and October 2009.