Insurance – An Ounce of Prevention For Litigation Defense Costs

Both businesses and individuals can be protected against high legal costs for defending against claims through insurance. Whether you carry basic premises liability coverage, or have the full package that includes employment practices liability (EPL) insurance, homeowner’s insurance, or even renter’s insurance, it is wise to ask your attorney if it makes sense to tender a claim that is made against you to your insurance carrier for defense and indemnity. Defense coverage is not guaranteed, and is dependent completely upon factors you cannot control (such as how the Plaintiff’s attorney chooses to draft the complaint against you). Indemnity against a possible judgment is not guaranteed, either, and will depend upon too many complex factors to review here. The important thing for a defendant in any legal action to know, however, is that requesting a tender of the claim to your insurance carrier often makes good sense. Even if you think that your attorney will automatically do this, it is a good belt and suspenders approach to make sure that it is considered and discussed. Many attorneys have handled so many cases of a similar nature that they may be able to advise you immediately that it would be a waste of time. Still, it is worth having the discussion and worth considering whether even one count of the complaint would be subject to insurance coverage.

There are negative aspects to tendering the claim to your insurance carrier, and this blog is not intended to suggest that tendering a claim is ALWAYS a good idea. Some of the negatives are that the insurer may have a stable of attorneys it uses through a lower-cost agreement (similar to medical insurers insisting that you utilize only this doctor and that hospital). Further, it can impact your rating, causing premiums to increase and even resulting in cancellation of coverage altogether. So, the potential defense costs and/or potential exposure for a judgment must be weighed against potential long-term insurance premium and coverage ramifications. Having the discussion with your attorney about these issues, when you are the defendant, is ALWAYS a good idea!