Insurance coverage issues for business litigators.

1. V E R O N I C A B A T E S
M I C H A E L H U D D L E S T O N
H E A T H E R K U B I A K
E R N E S T M A R T I N
A M Y E L I Z A B E T H S T E W A R T , M O D E R A T O R
T E X A S B A R C L E
3 R D A N N U A L B U S I N E S S T O R T S I N S T I T U T E
O C T O B E R 1 4 , 2 0 1 1
What Every Business Tort Lawyer Needs
to Know about Insurance Coverage

2. • Commercial General Liability
• Directors and Officers Liability
• Fiduciary Liability
• Errors & Omissions Liability
• Employment Practices Liability
• Intellectual Property Liability
• Cyber Liability
Types of Policies

3. Commercial General
Liability
Examples
 Bodily Injury
 Property Damage
 Advertising Injury
 Personal Injury
 Business disparagement
 Defamation
 Malicious prosecution
 Copyright infringement
 Misappropriation of style of
doing business
 Invasion of privacy
 Misappropriation of
advertising ideas
 Wrongful eviction
 False arrest/imprisonment
What’s Covered?

4. Errors & Omissions Examples
 Wrongful Acts (in
connection the
insured’s profession)
 Any professional
negligence claim
 Bankers
 Accountants
 Real estate agents
 Lawyers
 Architects
 Engineers
 Definition of
“professional services”
What’s Covered?

5. Directors & Officers
Liability Examples
 Wrongful Acts—acts,
errors or omissions
 Breach of duty
 Misleading statements
 Errors & omissions
 Mismanagement
What’s Covered?

6. Fiduciary Liability Examples
 Wrongful Acts  Breach of fiduciary
duty under ERISA
 Other breaches of
fiduciary duty
 [Sometimes]
negligence in
administration of
benefit plan
What’s Covered?

7. Which Policy Applies
• Policy Period
• Claims-made v. Occurrence
• Primary v. Excess
• Named Insured v. Additional Insured

8. Claims-Made Policies
• Prior acts and retro dates
o Policy may require wrongful act within specific
time
• Definition of claim
o Claim requires demand for money
o Must be in policy period

9. Claims-Made Policies
• Incident notice
o Can invoke coverage before claim is made
o Can freeze coverage in a policy period
different from actual claim
• No coverage for previously reported
incidents
o Form of known or loss in progress provision
• Was tail coverage purchased?
• Claims made and reported?

10. Notice to the Insurer
• Notify all potential insurers
• Check policy for when and where
• “As soon as practicable” or promptly
• During policy period or within X days
• Prejudice
• Cooperation

11. Practical Considerations
• As plaintiff, seek a copy of any reservation of
rights letters
• Take inventory
• Get parent, subsidiary and associated primary and
excess polices
• Make sure you have complete policies
• Use certificates to run down the actual policies
• Read the policies carefully
• Involve the broker

12. Practical Considerations
• Pay attention: different forms and
endorsements can change the coverage
o Get coverage from the inception with current
carrier
o Renewal additions can be eliminated
o Check form approval with the TDI
• Err on the side of giving notice
• Never assume someone is or will provide
notice and do it correctly for you

13. Insurer’s Response
• Unqualified defense
• Reservation of rights
• Denial
• Untimely or lack of response

14. Duty to Defend
• Triggered by allegations
• Allegations taken as true
• Extrinsic evidence not considered?
• Doubts resolved in favor of insured
• Broader than duty to indemnify

15. Under certain circumstances, an insurer
may not insist on its right to control the
defense—what are those circumstances?
What is a reasonable rate and
who decides?
Independent Counsel

16. Declaratory Judgment Actions
• Jurisdiction/Venue
• Parties
• Prohibitions

17. • Stowers
o Duty not to settle. Pride Transp. v. Continental Cas. Co.,
2011 WL 1197306 (N.D.Tex., Mar 31, 2011)
• Settlement
o Gandy/Atofina
• Entity Changes—Conversions and
Mergers and Acquisitions
o VRV
o Ford Bacon
o Keller Foundations
o Nautilus
Trends in Texas

18. • Gilbert and blended tort/contract claims
versus Lamar Homes
• Nokia
o Using the “legal obligation to pay as damages” to expand
coverage
o Potentially covered—partial or incomplete pleadings
• D & O
o Stanford fallout
o Disgorgement/ill-gotten gains
Trends in Texas

19. • How to deal with a difficult insurer
• Resolution strategies
• Ideas for maximizing coverage
Practical Advice

20. Questions?

21. THANKS!