In the normal course of business, companies purchase insurance to help manage risks. Some of the most common types of insurance purchased by businesses include commercial general liability, professional liability, and directors’ and officers’ liability.
On unfortunate occasions, a company may have legal actions brought against the interest of the business. When this happens, insurance held by the organization can play a role in the development of a successful litigation strategy, which is the roadmap developed by attorneys outlining the goals and potential pitfalls associated with the trajectory of a case. The litigation strategy may include tactical decisions such as responding to allegations, hiring expert witnesses, seeking a summary judgment, requesting a jury trial or initiating settlement discussion.
Often, attorneys will consider whether asserting particular claims might trigger insurance coverage. Bringing an insurance company into the legal claim could potentially increase the amount of money available to settle a case or to pay a judgment. On the other hand, the insurance company may be more familiar with the legal process and may have more financial resources to defend the claim.
Commercial General Liability
A commercial general liability insurance policy usually covers property damage and bodily injury claims; however, certain types of damages may be excluded from coverage under the terms of the policy. Typically, the insurance coverage will pay any damages awarded to the plaintiff up to the limits of the policy if the company is found liable and the claim is covered by the policy. In addition, a CGL policy almost always covers attorney fees, litigation expenses, and court costs in addition to the limits of the policy. Such coverage ensures the expense of the lawsuit does not impact the financial security of the company. CGL coverage is one of the more important insurance products because of the negative impact a lawsuit can have against business and because liability suits occur regularly.
Professional Liability Insurance
Professional liability insurance, sometimes called errors and omissions insurance, shields businesses when a client claims that professional services were not performed correctly, or that some oversight occurred. As with CGL policies, professional liability insurance usually includes payment of lawyers’ fees, court expenses, expert witness fees, settlement amounts, and court-ordered compensation. Typically, however, all of these payments are subject to the limits of the policy.
Directors and Officers Insurance
Commercial D&O insurance is designed to respond to situations in which a director or officer of the company has been exposed to liability in a legal claim against the company. Generally, D&O policies provide coverage for the acts or omissions of individual directors and officers separate and apart from any obligation the company may have to indemnify them against such claims.
Facing a Legal Claim?
The decision to explore representation options is the first step in building a personalized litigation strategy to overcome a legal claim.
Insurance policies almost always include a “right and duty to defend” clause giving the insurance company the right to select the attorney representing the company and to control certain aspects of the litigation strategy. Although the attorney selected by the insurance company owes his or her duty to your company as the client, there is a strong incentive for the attorney to please the insurance company who is a source of regular referral business for the attorney. In some cases, the attorney may even be “captive” counsel, meaning the attorney exclusively works on cases referred by a single particular insurance company. Seeking consultation from an independent attorney could perhaps serve a company’s interests more effectively.
A well-developed litigation strategy can save your business time and money. Seeking expert advice from the qualified business litigation attorneys at Bennett Weston, LaJone & Turner, P.C. when facing a legal claim can help a company determine when and how to use insurance policies to best serve the interests of the company.