Tag: Risk Management

Time’s Running Out: How Hidden Policy Limitations Can Tank Insurance Claims

Many policyholders don’t realize that their insurance rights are governed not just by statutes of limitation, but by contractual deadlines buried in policy language.

It is common for commercial insurance policies to limit the time to bring a claim or file suit against an insurer for a wrongful denial to as little as one year from the date of loss.

Why This Matters

Even the strongest coverage argument is worthless if it is raised too late.

Common Mistakes I See

  • Assuming general statutes of limitation apply instead of policy-specific deadlines
  • Treating a denial letter as the end of the road
  • Failing to toll deadlines while negotiations continue
  • Not revisiting claims that were never formally submitted

What Companies Should Do Now

  • Locate and review all potentially responsive policies
  • Identify contractual suit-limitation clauses
  • Confirm whether deadlines were tolled or extended
  • Assess whether claims can still be preserved or revived

Bottom Line:
Insurance coverage fights are often more time sensitive than companies realize. Companies that wait may find the courthouse doors closed, regardless of the merits of their claim.

Five Hard-Won Lessons From Insurance Recovery Litigation

After years of litigating high-stakes insurance coverage disputes, I have seen several common threads emerge regardless of the industry, policy type, or size of the claim. These are not theoretical. They are patterns that directly impact whether a company recovers millions or walks away empty-handed.

1. Never Accept a Denial at Face Value

An insurer’s denial letter is not the final word. It is the opening position. Even sophisticated brokers and in-house legal teams can miss coverage triggers embedded in policy language or overlooked endorsements. A second opinion is often the difference between zero recovery and meaningful payment.

2. Recordkeeping Is a Competitive Advantage

Many insurance policies (particularly legacy general liability policies) remain relevant decades after issuance. Companies with disciplined policy retention recover faster and more fully. Poor records slow everything down and, in some cases, make recovery next to impossible.

3. Professionalism Wins Cases

Firm advocacy does not require hostility. The disputes that resolve efficiently often involve counsel who understand the issues without making them personal. Once emotion enters the equation, judgment suffers and costs increase.

4. Persistence Is Not Optional

Delay favors insurers. Every day a claim remains unpaid, the insurer retains use of money that may ultimately be owed. Persistence is often what forces resolution.

A good policyholder spends every day advancing the ball.

5. Know When to Stop

Maximizing recovery does not mean pursuing every last dollar at all costs. Experienced counsel should help clients identify the point where resolution is economically and strategically rational. If that guidance isn’t being provided, it’s worth asking why.

Insurance recovery is not about confrontation for its own sake. It is about enforcing contracts that companies already paid for. And doing so with discipline, perspective, and judgment.

Business Owners and Operators: Are You Buying the Right Insurance?

I recently had a conversation with the owner of a closely held company that perfectly illustrates a common problem.

Within the first five minutes, it became clear the company was not buying the right insurance.

No business owner or risk manager wants to hear, “You need more (or different) insurance.” But discovering that gap before a catastrophic loss or lawsuit that falls outside your coverage is much better than learning about it after the fact.

Insurance works best when it is intentionally aligned with how your business operates in practice, not when it’s purchased on autopilot or inherited year after year without scrutiny.

Below are several foundational questions every business should periodically revisit to make sure its insurance program still fits.

1. What Type of Property Does the Business Have?

Does the company own or lease physical space?

An office, warehouse, retail location, or mixed-use facility?

If so, commercial property insurance and premises-based liability coverage are typically essential. But the scope of that coverage matters. The risks associated with a single-office professional firm look very different from those of a multi-location operation or a space used for manufacturing, storage, or customer-facing activities.

Property policies offer dozens of sub-limited coverages. Make sure your company buys the ones that match its risks.

2. Does the Business Handle Confidential or Non-Public Information?

If your business touches customer data, employee records, financial information, or proprietary data, cyber insurance is no longer optional.

Cyber policies can respond not only to data breaches, but also to ransomware, business interruption, regulatory investigations, and third-party liability claims. Many businesses assume they are “too small” or “not a target,” an assumption that attackers routinely exploit.

3. Does the Business Have Employees, Contractors, or Interns?

Once people are involved, risk multiplies.

Questions to ask include:

  • How many workers are there?
  • Are they full-time, part-time, or independent contractors?
  • Are interns or temporary workers involved?

At that point, exposures such as employment practices liability, workplace injuries, employee theft or dishonesty, and even benefits-related disputes come into play. Your insurance program must evolve as your workforce does.

4. Are There Co-Owners, Shareholders, or Outside Business Partners?

Ownership structure matters.

Businesses with multiple owners, investors, or strategic partners face a different class of risk: claims alleging mismanagement, breaches of fiduciary duty, or poor business judgment. That’s where Directors & Officers (D&O) insurance becomes critical.

Without it, disputes among insiders—or claims brought by outsiders—can quickly turn into uninsured, high-dollar problems.

5. What Function Does the Business Actually Serve?

What you do determines what can go wrong.

  • Companies providing specialized or professional services may need errors & omissions (E&O) or malpractice coverage.
  • Businesses selling products often require a general liability tower that responds to products liability claims.
  • Financial or fiduciary services businesses may need fidelity bonds or other specialized forms of protection.

A generic policy rarely maps cleanly onto specialized operations.

The Takeaway

Insurance should be a living risk-management tool, not a static expense line item.

If your business has grown, changed direction, added people, expanded services, or taken on new partners, there’s a meaningful chance your insurance program hasn’t kept up. Asking the right questions—before a loss occurs—is one of the simplest ways to avoid discovering too late that your coverage doesn’t match your reality.

Proactive review beats reactive regret—every time.

Insurance Policies Define “Claim” Very Broadly

A good rule of thumb in the workplace: if you, your business, or your client receive a letter, email, or other correspondence demanding that the recipient take some kind of action—regardless of whether that action involves a monetary payment —it’s time to talk to the risk and insurance team.

a magnifying glass sitting on top of a piece of paper
Photo by Vlad Deep on Unsplash

Claims-made corporate insurance policies like Directors & Officers (D&O), Errors & Omissions/malpractice (E&O), Cyber, and Employment Practices Liability (EPL) often define a “claim” very broadly.

The definition typically includes any demand for “relief,” whether monetary or non-monetary.

Many insurance coverage disputes come from policyholders not appreciating this broad definition of “claim” and, as a result, missing the chance to notify their insurers of a new “claim” within the necessary timeframe.

#insurance #riskmanagement #riskmitigation #insurancerecovery #tiptuesday #management #businessandmanagement

Black Friday: Getting a “Deal” On Contractual Risk Transfer

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Photo by Tamanna Rumee on Unsplash

Photo by Tamanna Rumee on Unsplash

As everyone digests their turkey and begins door-busting, here are some Black Friday thoughts from the #RiskManaged archives to get the best “deal” in your business agreements:

1. If you want someone to buy insurance for you or your business as part of a contract, you need two “magic” clauses. The first states that Company X is buying certain insurance at their own expense. The second, more important one, says that Company X agrees to name you/your business as an “additional insured” on that insurance.”

2. The “naming” clause should require Company X to add an endorsement to it’s policies adding you/your business. The separate endorsement avoids any ambiguities

3. Company X’s insurance should be “primary and non-contributory”—meaning that their insurance pays a claim before your insurance.

4. Company X’s insurance must “waive subrogation” in favor of you. You don’t want the insurance Company X is buying to create future problems for you.

5. Always include a clause requiring Company X to provide you with a copy of the policy on request—NOT just a “Certificate of Insurance. The policy, not the certificate, is what governs any dispute.

Policyholders Have a Right to Know Why Their Claim Has Been Denied

Policyholders have a right to know an insurer’s basis for denying a claim. Should the policyholder decide to sue its insurer for wrongfully denying that claim, the “right to know” entitles you to full discovery of the insurer’s claim file(s). This includes any pre-denial analysis, communications, or documents touched by the insurer’s in-house or outside claims attorneys.

Insurers often refuse to turn over full claim files in discovery because the file is allegedly “not relevant” to the court’s independent review of the claim.

Even more commonly, insurers assert that portions of their claim file and claim communications are privileged because of a coverage attorney’s involvement. In essence, insurers believe that they can hide their decision-making from disclosure by keeping an attorney involved.

In the Federated Mutual Insurance Company v. Coyle Mechanical Supply, et al., No. 17-cv-00991-SMY-GCS (S.D. Ill. July 28, 2021) (linked below), the U.S. District Court for the Southern District of Illinois joined the chorus of courts rejecting these insurer roadblocks to the policyholder’s right to know. The decision is well-reasoned, but I will specifically highlight the following:

Insurance companies are in the business of evaluating and granting or denying claims for coverage after alleged accidents or occurrences. Documents created to assist an insurer in that process, prior to the denial of a claim at issue in a lawsuit, reflect that business and are more appropriately categorized as routine corporate practices than as legal workproduct.

This case takes me back to the Number 1 rule of insurance coverage: never accept your insurer’s representations at face value.

Unless your insurer is offering full coverage for a loss with no reservations, there is always more to the story than meets the eye.

Policyholder’s Right to Know_ Federated vDownload

Insurance Litigation: Naming the Right Insurer is Half the Battle

Insurance Tip of The Day: Hire Someone Who Pays Attention To Details.

Insurance companies are complex webs of parents, subsidiaries, markets, and affiliates. If you’re going to sue your insurer, make sure you sue the company that actually wrote the policy.

Your Local Plain City The Hartford Insurance Group, Inc. Agency | Mitchell Insurance Agency

From Law360:

Law360 (October 28, 2020, 4:40 PM EDT ) The Hartford Financial Services Group Inc. is urging a California federal court to drop it from a waxing salon’s COVID-19-related loss suit, arguing it was just the holding company of the insurer that issued the policy and therefore has no legal liability toward the salon whatsoever.

Hartford said Tuesday that it was Sentinel Insurance Co. that issued the policy to Franklin EWC Inc. and it was not a party involved in the insurance contract. Hartford said it is not an insurer entity itself, but rather owns carriers that write policies.

“Sentinel alone insured Franklin EWC, and only Sentinel could have breached the agreement,” Hartford said in the motion. “HFSG cannot breach obligations it does not have.”

***
On Tuesday, Hartford argued that the salon’s amended complaint offered nothing convincing regarding why it included Hartford in the suit, since it has no contract with the salon.

“The very first page of the policy makes clear that the ‘writing company’ is ‘Sentinel Insurance Company Ltd.’ and the declarations page likewise lists the insurer as ‘Sentinel,’” Hartford said.

The salon has alleged it was “informed” that Hartford wrote and approved the parts of the policy at issue, according to Tuesday’s motion. Franklin EWC has argued that Hartford is responsible for coverage duty because the policy language referenced the term “The Hartford” throughout.

However, Hartford said, “’The Hartford’ is not a legal entity, but a brand name used by multiple, distinct entities, including Sentinel. HFSG’s Form 10-K explains that the term ‘The Hartford’ is a name that generally refers to it and its subsidiaries.”

From the Reed Smith days: In the Wake of Hurricane Matthew, the Florida Supreme Court Announces Major Victory for Policyholders in Sebo

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As individuals and businesses continue to recover from a devastating hurricane season—including Hurricane Matthew—the Florida Supreme Court provided policyholders with reason to be optimistic. Under the Florida Supreme Court’s decision in Sebo v. American Home Assurance Company, Inc., Florida policyholders that suffer property loss as a result of multiple perils, at least one of which is covered, are entitled to full insurance coverage even if the other perils are excluded from coverage under the policy.

The Sebo decision arose from a split of authority among Florida appellate courts regarding the proper standard for evaluating coverage when an insured suffers property loss as a result of both covered and excluded causes. In Sebo, the policyholder suffered property damage to his home from rainstorms and Hurricane Wilma, but it was not clear whether the damage also was caused by potentially excluded design and construction defects in the home. The insurer refused to cover the full scope of the storm damage based on a policy exclusion that barred coverage for “any loss caused by faulty, inadequate, or defective . . . design, specifications, workmanship, repair, [or] construction . . .” The insurer denied coverage based on its position that where multiple perils caused the same loss, a loss is only covered if an insured peril was the “efficient proximate cause” of the loss – i.e., the cause “that set the other in motion.” Florida’s Second District Court of Appeal agreed with the insurer.

On appeal to the Florida Supreme Court, the insurer’s position was rejected and the court instead adopted the “concurrent cause doctrine,” which holds that there may be coverage “where an insured risk constitutes a concurrent cause of the loss even where the insured risk [is] not . . . the prime or efficient cause of the accident.” See Wallach v. Rosenberg, 527 So. 2d 1386 (Fla. 3d DCA 1988). Importantly for policyholders, the court endorsed the view that “[w]here weather perils combine with human negligence to cause a loss, it seems logical and reasonable to find the loss covered by an all-risk policy even if one of the causes is excluded from coverage….”

As a result of the Sebo decision, where it is impossible to determine the sequence of perils leading to a property loss, Florida policyholders must only show that at least one of the perils causing the loss is covered. While celebrating this decision, policyholders should be mindful that because the court did not address anti-concurrent causation language contained elsewhere in the policy, further litigation on this issue may be forthcoming in Florida. Because anti-concurrent causation language has been found by courts in some states to preclude coverage for losses caused concurrently by covered and excluded perils, insurers in Florida will look to insert this language into new and renewal policies to avoid the effect of the Sebo ruling. For this reason, policyholders in Florida, and elsewhere, should embrace the favorable Sebo ruling while avoiding any efforts by insurers to include anti-concurrent causation language in policies in an attempt to undercut Florida law.

Originally posted December 1, 2016.

Co-Authored with my friend Kevin Dreher.

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