Overview of Commercial Insurance Coverage and Bad Faith Claims

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1 Overview of Commercial Insurance Coverage and Bad Faith Claims Matthew D. Stockwell Pillsbury Winthrop Shaw Pittman LLP 1540 Broadway, New York, NY (212) Pillsbury Winthrop Shaw Pittman LLP

2 Overview First Party Insurance insurance that covers one s own property in the event of an injury or loss (property insurance, all risk, inland marine, theft/crime) Third Party Insurance covers one s liability to a third party (CGL, E&O, D&O) Key policy provisions in first and third party policies

3 Overview How to deal with insurance companies (placing on notice, reporting claims, claim adjustment) Bad faith claims handling practices ú First party and third party claims Other related issues ú Certificates of Insurance what they can and cannot do ú Self-insurance ú Waiver of Subrogation

4 First Party Policies Property Insurance ú Named Peril v. All-Risk forms ú Property Damage ú Business Interruption Cyber ú Destroyed data, virus or malware, service attack Inland Marine ú Covers property in transit over land and instrumentalities of transportation and communication

5 First Party Policies Key Provisions Service of Suit Limitations (shortening statute of limitations) Anti-Concurrent Causation Clauses (may limit insurer s liability when a covered risk combines with an excluded peril to cause a loss) Causes of Loss Deductible and Number of Occurrences

6 Sample Service of Suit Limitation D. LEGAL ACTION AGAINST US. No one may bring a legal action against us under this Coverage Part unless: 1. There has been full compliance with all of the terms of this Coverage Part; and 2. The action is brought within 2 years after the date on which the direct physical loss or damage occurred.

7 Sample ACC Clause We do not cover loss to any property resulting directly or indirectly from any of the following. Such a loss is excluded even if another peril or event contributed concurrently or in any sequence of the loss.... Water Flood, surface water... Mudslide or mudflow Earth Movement

8 First Party Policies Key Provisions Business Interruption Coverage ú Contingent BI Coverage ú Sublimits of Liability ú Time Element Extensions Property Damage ú Faulty Workmanship Exclusion ú Sublimits of Liability ú Additional Coverages Appraisal Exclusions

9 Third Party Policies Commercial General Liability ú Covers property damage or injury arising out of policyholder s products or business operations Errors & Omissions ú Professional liability insurance insurance brokers, design professionals, accountants, etc. Directors and Officers ú Generally covers directors and officers liability when sued in their individual capacities and reimburses company

10 Third Party Policies Key Provisions Notice Requirement Duty to Cooperate Claims Made vs. Occurrence What is an Occurrence? Products/Completed and Premises/Operations Coverages Your Work/Your Product Exclusions Sistership/Recall Exclusion

11 Claim Submission and Adjustment Preliminary Loss Estimate Proof of Claim Present Well-Framed Claim that Tracks Policy Respond to Insurer Requests Request Payment for Undisputed Amounts

12 Bad Faith Claims Handling Practices Third Party Claims ú Insurer must defend the policyholder against potentially covered claims asserted against the policyholder, and to pay settlements or judgments awarded against the policyholder in connection with covered claims (duty to defend and indemnify) ú Insurer must settle a claim within the insured s policy limits unless it has a reasonable basis to not do so Insurer acting in bad faith may be liable for attorneys fees and possibly punitive damages

13 Bad Faith Claims Handling Practices First Party Claims ú Insurer has a duty to act reasonably and with proper justification when handling insurance claims that policyholders submit ú Must investigate claim thoroughly and in a timely manner and cannot refuse to pay a claim without a reasonable basis ú State Regulations Unfair Claims Handling Practices

14 Self-Insurance Company can set aside funds to cover losses that ordinarily would be covered by an insurance program. Most companies nevertheless obtain excess insurance to protect against severe losses. Can reduce expenses and provide company with increased cash flow.

15 Certificates of Insurance Provides information about an insurance policy such as lines of insurance, policy limits. A COI is not an insurance policy and does not afford coverage it is merely evidence that a policy has been issued. Review the actual policy. If you are seeking additional insured status, ensure that policy contains appropriate endorsement. If you are giving out COIs, be careful of eroding your coverage. Cancellation and modification of coverage.

16 Waivers Waiver of Subrogation ú Parties agree to shift the risk of loss to insurance companies ú Prevents an insured party s insurer from subrogating against another party to the insured s contract. ú AIA: The Owner and Contractor waive all rights against [each other]... for damages caused by fire or other causes of loss to the extent covered by property insurance... Consequential Damages Waivers Loss of Use Waiver (AIA): The Owner waives all rights of action against the Contractor for loss of use of the Owner s property, including consequential losses due to fire or other hazards however caused.

THE MOST FREQUENT CLAIMS BROUGHT AGAINST HOTELS AND HOW TO PREVENT THEM v Anderson Kill P.C. All Rights Reserved.

THE MOST FREQUENT CLAIMS BROUGHT AGAINST HOTELS AND HOW TO PREVENT THEM 1 Allen Wolff Shareholder, Anderson Kill Insurance Lawyer Construction Lawyer Trial Lawyer 2 Disclaimer The views expressed by the