The cooperation requirement under insurance policies can be abused by an insurance carrier. Keep in mind that your insurer is interested in finding out how to deny coverage of your claim. An insurer looks for reasons to deny coverage by demanding that you cooperate by providing it with information. You should prepare for cooperation demands seeking information that might be misused when you seek insurance coverage under a director & officer policy or a general liability policy or any insurance policy.
D&O Diary has a very interesting blog about a policyholder’s duty to cooperate with an insurer that has reserved its rights to deny coverage.
What your insurer requires
An important issue not addressed by D&O Diary’s post is that your insurer will use information you provide as part of cooperation to figure out how to deny coverage. Often you will not know what your lawyer is reporting to the insurance carrier. You need to know what that information is. You also need to know what the lawyer representing you is obligated to do, or not do, for the insurance carrier. The agreement the carrier has with the lawyer may prohibit the lawyer from assisting you in obtaining insurance coverage.
Perils of reservation of rights
This is one of the perils of being defended subject to a “reservation of rights.” When an insurance carrier hires a lawyer and defends its policyholder, it typically does so under a reservation of rights letter. This reservation of rights preserves the insurer’s right to later deny coverage and recover attorney’s fees and other costs of defense. Be aware that in this situation the insurer will be closely scrutinizing the information it obtains from you and the lawyer representing you to for anything that will allow it to deny coverage.
If your defense is provided under a reservation of rights, be aware of these issues and consult an independent insurance coverage attorney to protect yourself.
Lisa Bragança has represented directors and officers as well as Fortune 500 companies in insurance coverage matters. She considers potential insurance coverage in recovering losses for investors all over the country, and defending individuals and businesses in government investigations. She is a member of the Public Investor Advocacy Bar Association (PIABA) and has helped clients recover millions of dollars in investment losses. As a Branch Chief with the SEC Division of Enforcement, Lisa supervised a wide range of investigations of investment fraud.
You can reach Lisa at (847) 906-3460 or Lisa@SECDefenseAttorney.com. You can follow Lisa on Twitter @LisaBraganca.
Disclaimer: This information is for general purposes only and should not be interpreted to indicate a certain result will occur in your specific legal situation. The information on this website is not legal advice and does not create an attorney-client relationship.