Articles

Tips In Dealing With Coverage Issues Versus Liability Issues

By:  Joseph L. Vaccaro, CCLA
Sr. Paralegal / Insurance Specialist

Consider these facts.  A client comes into your office and says that while he was working as a pool salesman, two disgruntled customers decided to picket the pool company.  This had gone on all day long.  It finally came time to close down for the day.  The client went outside and, not seeing the picketers, started to pick up the picketing signs they left to throw into the trash. 

The picketers, having a late lunch at a nearby luncheonette, saw this and ran up to the client demanding their signs.  An argument ensued and one of the picketers decided to smash the client over the head with one of the signs and attempted to beat him up.  As the client was backing up to get away from his assailant, he tripped and fell, injuring his back.  Fortunately, the picketers then left. 

Subsequently, as a complication of his injuries resulting from a medical malpractice, the client ended up being permanently and totally disabled.  A malpractice case is pursued and a recovery is made.  However, there is still a viable claim against the picketers, as no lawsuit was ever filed against them and the picketers have homeowners insurance. 

A young but inexperienced attorney undertakes representation and, delighted at his good fortune in getting a case of what appears to be clear liability against the picketers, sends the following letter:

“Dear Mr. & Mrs. Defendant:

This is to inform you that I represent Mr. Client in connection with the violent beating that you gave him on such and such a day.  As a result of your intentional and deliberate assault on my client, he suffered severe and debilitating injuries.  It was clear that you intended to deliberately injure my client and I therefore intend to proceed against you on his behalf for both compensatory and punitive damages.  I would strongly recommend that you notify your insurance company immediately of this claim”.

No one would disagree that this is a great case of liability!  The problem occurs when the defendants turn the notice letter over to their insurance company.  The claim supervisor is going to issue a “reservation of rights” letter and send the plaintiff’s attorney a letter politely stating their policy has no coverage for intentional acts despite disclosure indicating that the liability coverage is one million dollars!

All this novice attorney accomplished by jumping to a possibly erroneous conclusion and sending such a letter was to immediately tell the insurance company that there was a deliberate and intentional act that caused injury to his client  and arm the insurance company with a defense to avoid coverage.  As more seasoned practioners will recognize, there is no coverage for intentional acts under a homeowners policy.

One of the single most troublesome zone of interpretation for attorneys and insurance companies alike is the distinction between coverage and liability. Coverage refers to the contractual obligation of an insurance company to indemnify or pay on behalf of the insured for a given occurrence while liability refers to the legal responsibility of an insured to other persons or parties arising out of the accident or occurrence.  While there may be liability, there may not necessarily be coverage. 

Many times an insurance company decision as to whether coverage exists or does not exist under a policy will hinge upon how a particular claim is presented.  Typical exclusions for intentional acts might read “…this policy does not apply to bodily injury or property damage which is either expected or intended from the standpoint of the insured”.

Now consider the same set of facts and instead the following initial letter is sent:

“Dear Mr. & Mrs. Defendant:

I represent Mr. Plaintiff in connection with serious injuries he received on such and such a date.  His injuries occurred as a result of being negligently struck by you and or members of your family causing him to trip and fall to the ground fracturing his hip and suffering severe injury.  If you have not already done so, I would strongly urge you to notify your homeowners carrier immediately…”

In this actual case, such a letter was sent and the homeowners carrier never even raised a coverage issue.  The case was ultimately settled. 

One must anticipate potential coverage problems at the very start of representation.  Letters need to be worded carefully to describe the operative facts of the claim and to avoid conclusionary and unwarranted language and deceptions that might result in coverage denial.  Likewise, if a complaint is filed, it too needs to be carefully worded. 

Educate clients to coverage issues immediately.  Reiterate and review the facts of the claim in such a way as to avoid unwarranted coverage denials.  Make sure that the client agrees to the accuracy of the description.  Then present the facts to the insurance company completely and accurately and in a manner that precipitates coverage.