By David Humphreys, Carson Law Group, PLLC
Do your liability insurance premiums keep rising each year while your coverage dwindles? Despite the expensive premiums, have you had the unfortunate experience of submitting a claim only to have your insurer deny any coverage? If so, you are certainly not alone in the construction world. Construction liability insurance companies have become modern-day Shakespeares when writing exclusions in insurance policies in their attempt to remove most, if not all, coverage for the business risks contractors you face every day.
To quote the actual Shakespeare, if your insurer denies coverage, do not “weep with me, past hope, past cure, past help.” Instead, rely on a different Shakespearean quote: “true hope is swift and flies with swallow’s wings,” by which Shakespeare obviously meant, “Go see your lawyer!” or something like that. Of course, Shakespeare also wrote, “The first thing we do, let’s kill all the lawyers,” but that was in a different play.
An experienced construction lawyer, who also understands insurance coverage, can help you navigate an insurance claim where coverage is questionable, or where your insurer has already denied coverage. In fact, ideally you should involve your lawyer before you even submit the claim, as the claim submission itself may impact whether your insurer decides to provide coverage. Also, from day one, your insurer will undoubtedly be looking for information that supports denial of your claim. You will need an experienced coverage lawyer who knows what your insurer is looking for to assist you in submitting the claim and in responding to your insurer’s investigation in a way that maximizes your chances of your claim being covered.
“Until I know this sure uncertainty, I’ll entertain the offered fallacy.”
In this quote, Shakespeare describes someone playing along with a falsehood until he or she has enough information to discern the truth. Your insurer’s initial response to your claim could put you in a similar situation. When you turn a lawsuit over to your insurance company, one of three things will happen: your insurance company will either (1) agree to defend you and hire you a lawyer, (2) agree to initially defend you, but under a reservation of rights to later deny coverage, or (3) deny any coverage for the claim and abandon you to defend yourself.
While the law varies from state to state, generally speaking, your insurer owes you several duties when it receives your claim, including a duty to investigate the claim, a duty to provide you a defense for claims that might be covered under your insurance policy, a duty to pay covered claims, and a duty to settle within policy limits where possible and reasonable. Insurance companies often hedge their risk by initially providing a defense, but under a reservation of rights to later deny coverage. This typically arrives in the form of a letter informing you that XYZ law firm has been assigned to defend you, followed by numerous pages quoting policy language that may allow your insurer to later deny coverage and not pay a judgment entered against you.
If you receive this “reservation of rights” letter, you may be entitled—again, depending on your state’s laws—to hire your own personal attorney, independent of the law firm assigned by the insurance company, who will represent your interests alone. And, the best part is that state law may require your insurance company to pay the cost of your independent counsel.
If you haven’t already consulted independent counsel, you certainly should, following your receipt of either a reservation of rights letter or an outright denial of coverage, as there is likely an opportunity to challenge your insurer’s coverage position from the very beginning of your case. As one example of the options available to you, your state’s laws may allow you, or the plaintiff who is suing you, to directly sue your insurance company in the same lawsuit and have the judge in the same case decide whether there is coverage for the claim. The potential advantages of this are obvious: the local judge handling your case may be more sympathetic to you, as a local contractor, than your out-of-state insurance company.
An experienced insurance coverage lawyer who also knows your construction business will be armed with legal arguments to challenge your insurance company’s adverse coverage position. In recent successful cases, our firm has utilized numerous creative legal theories to defeat insurers’ initial coverage denials and force the insurers to resolve claims with insurance proceeds. For example, the following excerpt from a legal brief we recently filed lists thirteen different legal arguments we utilized to defeat the various exclusions raised by our client’s insurer in its coverage denial:
“The miserable have no other medicine but only hope.”
To conclude the tortured Shakespeare references, the above list of potential legal challenges to insurance claim denials should give you hope that, even in the miserable position of having an insurance claim denied, your trusted construction lawyer, who also knows insurance coverage, may be able to fight through the numerous exclusions in your insurance policy, get your defense paid for, and resolve your claim with insurance money. Good luck, and, until next time, “Good night, good night! Parting is such sweet sorrow.”
About the author:
David Humphreys, Esq., is an experienced litigator and business attorney with over 25 years’ experience helping clients resolve complex disputes, negotiate contracts, clear administrative hurdles, and more. David’s experience includes representing construction industry clients and developers in construction defect litigation, insurance coverage disputes, bond and lien claims, and breach of contract matters. In addition to his law practice, David is a frequent speaker at construction industry national meetings on topics including insurance coverage, contracting, construction defect litigation, and construction risk management. David’s firm, Carson Law Group, PLLC, is based in Jackson, Mississippi, and represents clients throughout the Southeastern United States.
