Arbitration & Mediation

Follow the Money: Coverage 101 and 2007 Fifty State Analysis of Coverage for Environmental Damage Liability

By Victoria Pynchon

I was a commercial, antitrust, IP and securities litigator long before I devoted nearly a decade of my practice to environmental coverage litigation.  In the process, I learned enough about Comprehensive General Liability ("CGL") coverage to make me worry about how well I'd served my commercial clients in regard to the insurance coverage potentially available to them.  

If you are a commercial litigator -- or any type of litigator who defends your clients against claims for damages or for injunctive or other equitable relief -- you must

1. ask your clients for all of their insurance policies, even those that seem unlikely to provide coverage; 
2. carefully review the precise wording of the insuring agreements and research the case law in the relevant jurisdiction to determine how the courts have interpreted those insuring agreements under facts similar to those your client's case presents;
3. except for some narrow additional protections provided to insureds, be aware that there is no such thing as "the law" of coverage under any particular type of policy -- all coverage flows directly from the precise language of the insuring agreement
   1. in most jurisdictions, that language -- if ambiguous -- is interpreted in favor of the insured's objectively reasonable expectations; and, 
   2. in most jurisdictions the rule of contra proferendum will require a court to construe any ambiguity in an insurance policy against the insurance carrier
4. carefully review the exclusions contained in those policies and research the relevant state's case law (as well as federal cases applying state laws) interpreting those exclusions; 
5. before concluding that there is no coverage, read available treatises as well as recent law review articles that may well suggest creative ways of distinguishing adverse authority or extending existing principles to bring your client's claims within the terms of the policy or outside of pertinent exclusions;
6. if you have any doubt whatsoever about the existence of coverage, tender the claim to your client's carrier and let the carrier do the analysis;
7. if the carrier denies coverage, read the reasons for denial critically and respond with any reasonable interpretation of the policy that will support a claim of coverage;
8. if the carrier continues to deny coverage, keep the carrier informed of the progress of the litigation and invite the carrier to respond to all settlement demands and to attend all mediations and settlement conferences.

If the cost of the lawsuit is beyond your client's means or will deprive it of capital necessary to meet its business goals for the next few years, retain coverage counsel for a second opinion. 

Have I mentioned that my beloved husband is one of the best coverage attorneys in the country -- having litigated the World Trade Center coverage action on behalf of Larry Silverstein's lender GMAC?  And that I formed my opinion about his brilliance while I was representing the London Market Insurance Carriers and he was representing the policy holder?  Even if your case does not justify hiring someone like my husband to give you a second opinion, there are lots of good coverage attorneys out there who can so that you can complete your coverage "due diligence" for your client.

At last, to the 2007 Fifty State Environment Coverage Analysis

I ran across this great resource while doing a little online research.  It's a comprehensive review of the law pertaining to the interpretation and application of insurance policies to potential or actual environmental liabilities entitled Environmental Insurance Litigation 2007   --  A State by State Case Law Survey by Michael F. Aylward, Esq. of Morrison Mahoney LLP.

If your clients have been hit with demands to clean up toxic waste, this is an invaluable resource.  A specialist in the field, however, should be consulted to maximize the chances that coverage will be provided.

Have I mentioned that I'm on the Insurance Coverage Mediation Panel of Neutrals with the  International Institute of Conflict Prevention and Resolution ("CPR")?  And since I'm a former defense coverage attorney currently married to policy holder counsel, you're unlikely to find many other mediators who are both extremely knowledgeable about the law of coverage and deeply neutral!

Full post as published by Settle It Now Negotiation Blog on January 31, 2008 (boomark / email).