When faced with an emerging mass tort, companies often first turn to trusted defense counsel for guidance, often utilizing them as the company’s “first line of defense” regarding insurance issues. In this role, defense counsel typically need to identify potentially responsive insurance policies, ensure that relevant insurers are properly noticed, and, in certain instances, make disclosures regarding the company’s insurance. Early actions guided by defense counsel can have significant impact on the potential for insurance to respond. Making the decision to include coverage counsel in these early stages can help ensure that the insurance claim is positioned in the most advantageous manner for the company. This role of defense counsel as the “first line of defense” on insurance issues was addressed in Mass Torts in the United States.
I. DEFENSE COUNSEL AS THE FIRST LINE OF DEFENSE ON INSURANCE ISSUES
Defense counsel’s involvement in addressing mass tort claims often precedes involvement of coverage counsel. Thus, defense counsel often will assist the client in evaluating the potentially applicable coverage, providing notice to the client’s insurance carriers, and addressing the insurers’ initial responses.
A. Identifying All Potentially Applicable Coverage
When faced with a mass tort claim, companies should collect, organize, and safeguard all of the company’s policies, reaching as far back in time as possible. This process includes identifying and obtaining, if possible, policies issued to other pertinent companies, such as predecessors and current or former affiliates of the company. This process should also include searching for any indicia of missing policies, such as proof of payment of premiums and correspondence with insurers and brokers. If the client does not yet have coverage counsel when the claim arises, the client’s insurance broker can assist the client and its defense counsel in this process. If reasonably possible, companies should undertake this effort even before they face mass tort claims. Once all potentially responsive policies have been identified, the policies need to be reviewed and analyzed. This includes evaluating past loss runs to determine if any of the identified policies have been eroded or exhausted by the payment of prior claims, identifying any policies affected by historic settlement agreements, and identifying any policies issued by insolvent insurers.
B. Provide Prompt Notice to Appropriate Insurers
With this information assembled, the next step is for the company to provide notice to all potentially implicated insurers. Which insurers are implicated will depend, in part, on the applicable jurisdiction’s approach to certain coverage issues, such as “trigger” and “allocation,” which we discuss in Section III.D of this chapter. In the initial stages of a claim, if coverage counsel is not yet involved and there is not yet a nuanced understanding of the coverage issues that could affect which insurers should respond to the claim, clients should err on the side of overinclusion when it comes to providing notice, absent relatively rare, case-specific circumstances that might justify refraining from giving notice. CGL policies include notice requirements, and failure to comply with these conditions can bar coverage. Notice requirements vary by insurance contract and state law. In general, while the majority of states apply the rule that late notice, absent prejudice to the insurer, does not bar coverage, a minority of states adhere to the rule that the insurer does not need to show prejudice from the late notice to avoid providing coverage. A sample notice letter is provided in Appendix A. The importance of these first two steps—identifying all potentially applicable coverage and then giving notice to all potentially responsible insurers—cannot be overstated. Defense counsel may be liable for malpractice if it fails to provide notice with respect to all pertinent coverage and also may be sanctioned if it does not disclose such insurance to plaintiffs in the underlying mass tort claims.
Early involvement of coverage counsel can help in navigating these two processes. In addition to analyzing insurance policies, loss runs, and prior coverage settlements, coverage counsel, working with pertinent consultants, can generate a visual representation of a client’s insurance portfolio (a coverage chart). A typical coverage chart displays basic policy information in a visual format that provides an easy-to-reference summary of the insurance portfolio. Coverage charts typically include information such as issuing insurer, policy number, policy period, layer of coverage, limits of coverage, solvency, gaps in coverage (a.k.a. white space), and other policy characteristics that are of specific interest (e.g., especially noteworthy exclusions). An unpopulated, sample coverage chart is presented in Appendix B. Although insurance brokers also sometimes can generate such charts, as discussed in Section III.A.2.b., there are privilege considerations in having a broker perform such functions.
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