Insurance is a valuable resource and should be managed wisely. Many companies have been saved from the brink of financial ruin due to their insurance resources. Although routine claims can often be handled with in-house resources, more complex insurance issues often land on the desks of busy in-house lawyers. This article will address circumstances in which in-house counsel may wish to consult with outside insurance coverage counsel.
Insurance Coverage Is Not Intuitive
Although an insurance policy is a contract, it is a very special type of contract. Insurance policies are contracts of adhesion written on standard forms using both very general and somewhat obscure terms such as “occurrence,” “claim,” “bodily injury” and “property damage.” Insurance claims are not intuitive and often produce confounding results. For example, although some courts have ordered insurers to pay for environmental response costs from historical manufacturing operations under decades-old policies, other courts allow insurers to avoid paying plainly covered claims based on failure to give prompt notice or other technical reasons.
To make matters more confusing, courts routinely reach contradictory results on the meaning and scope of identical form policy language applied to identical fact patterns. As a far from exhaustive list, courts differ on whether:
- Negligently performed construction is an “occurrence” and thus potentially covered under a commercial general liability policy.
- The “sudden and accidental” pollution exclusion applies to claims resulting from the unintentional release of pollutants over a period of time.
- The “absolute” pollution exclusion precludes claims not involving environmental pollution.
- An insurer must show it was prejudiced in order to deny a claim based on the policy condition that the insured must give notice “as soon as practicable.”
- Punitive damages not excluded by the policy language are insurable as a matter of public policy.
The Luck of the Draw
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