what every business tort lawyer needs to know

V E R O N I C A B A T E S M I C H A E L H U D D L E S T O N

H E A T H E R K U B I A K E R N E S T M A R T I N

A M Y E L I Z A B E T H S T E W A R T , M O D E R A T O R

T E X A S B A R C L E 3 R D A N N U A L B U S I N E S S T O R T S I N S T I T U T E

O C T O B E R 1 4 , 2 0 1 1

What Every Business Tort Lawyer Needs to Know about Insurance Coverage

• Commercial General Liability • Directors and Officers Liability • Fiduciary Liability • Errors & Omissions Liability • Employment Practices Liability • Intellectual Property Liability • Cyber Liability

Types of Policies

Commercial General Liability Examples

Bodily Injury Property Damage Advertising Injury Personal Injury

Business disparagement Defamation Malicious prosecution Copyright infringement Misappropriation of style of

doing business Invasion of privacy Misappropriation of

advertising ideas Wrongful eviction False arrest/imprisonment

What’s Covered?

Errors & Omissions Examples

Wrongful Acts (in connection the insured’s profession)

Any professional negligence claim Bankers Accountants Real estate agents Lawyers Architects Engineers

Definition of “professional services”

What’s Covered?

Directors & Officers Liability Examples

Wrongful Acts—acts, errors or omissions

Breach of duty Misleading statements Errors & omissions Mismanagement

What’s Covered?

Fiduciary Liability Examples

Wrongful Acts Breach of fiduciary duty under ERISA

Other breaches of fiduciary duty

[Sometimes] negligence in administration of benefit plan

What’s Covered?

Which Policy Applies

• Policy Period • Claims-made v. Occurrence • Primary v. Excess • Named Insured v. Additional Insured

Claims-Made Policies

• Prior acts and retro dates o Policy may require wrongful act within specific

time • Definition of claim

o Claim requires demand for money o Must be in policy period

Claims-Made Policies

• Incident notice o Can invoke coverage before claim is made o Can freeze coverage in a policy period

different from actual claim • No coverage for previously reported

incidents o Form of known or loss in progress provision

• Was tail coverage purchased? • Claims made and reported?

Notice to the Insurer

• Notify all potential insurers • Check policy for when and where • “As soon as practicable” or promptly • During policy period or within X days • Prejudice • Cooperation

Practical Considerations

• As plaintiff, seek a copy of any reservation of rights letters

• Take inventory • Get parent, subsidiary and associated primary and

excess polices

• Make sure you have complete policies • Use certificates to run down the actual policies

• Read the policies carefully • Involve the broker

Practical Considerations

• Pay attention: different forms and endorsements can change the coverage o Get coverage from the inception with current

carrier o Renewal additions can be eliminated o Check form approval with the TDI

• Err on the side of giving notice • Never assume someone is or will provide

notice and do it correctly for you

Insurer’s Response

• Unqualified defense • Reservation of rights • Denial • Untimely or lack of response

Duty to Defend

• Triggered by allegations • Allegations taken as true • Extrinsic evidence not considered? • Doubts resolved in favor of insured • Broader than duty to indemnify

Under certain circumstances, an insurer may not insist on its right to control the defense—what are those circumstances? What is a reasonable rate and who decides?

Independent Counsel

Declaratory Judgment Actions

• Jurisdiction/Venue • Parties • Prohibitions

• Stowers o Duty not to settle. Pride Transp. v. Continental Cas. Co.,

2011 WL 1197306 (N.D.Tex., Mar 31, 2011)

• Settlement o Gandy/Atofina

• Entity Changes—Conversions and Mergers and Acquisitions o VRV o Ford Bacon o Keller Foundations o Nautilus

Trends in Texas

• Gilbert and blended tort/contract claims versus Lamar Homes

• Nokia o Using the “legal obligation to pay as damages” to expand

coverage o Potentially covered—partial or incomplete pleadings

• D & O o Stanford fallout o Disgorgement/ill-gotten gains

Trends in Texas

• How to deal with a difficult insurer • Resolution strategies • Ideas for maximizing coverage

Practical Advice

Questions?

THANKS!