The wheels of justice can turn slowly. This is especially true in litigation about insurance coverage. For large insurance coverage actions such as those seeking insurance for asbestos claims or environmental claims, the case can very well go on for years and years. There is no incentive for an insurance company to shorten that time period because it is holding onto the money while the litigation continues. A cash flow analysis generally shows that it is in the insurance companies’ interest to have the case continue because the amount insurance companies are making on the money they are holding is greater than the cost of their continuing the litigation. We often see insurance companies’ answers to the policyholder’s complaint asserting anywhere from 30 to 50 affirmative defenses. Many of these defenses have little or no basis, but they serve to complicate the action and make it last longer.
The policyholders’ goal should be to get the case to trial. Too often it seems that insurance companies have little interest in settling, except at a deep discount, until the case is close to trial. This is consistent with the insurance companies wanting to hold the money for a longer amount of time. By pushing the case to trial, the policyholder is encouraging the insurance company to settle at a reasonable amount. If the insurance company does not settle, then the policyholder will still have its claim resolved at trial.
The problem faced by policyholders is how to shorten the time between the filing of the complaint and the resolution of their insurance claims. Keeping the pressure on the insurance companies is the approach we prefer.
Strategies for Securing Favorable Resolution–Quickly
First, use summary judgment motions to limit the issues as much as possible. Because discovery is the area of litigation that takes the bulk of the time, eliminating an issue removes the need for discovery associated with that issue. Many of the affirmative defenses asserted by the insurance companies that have little or no basis are ripe for summary judgment. Even if the summary judgment motion is unsuccessful, the issue on which the policyholder moved will often be more clearly defined as a result of the decision on the motion. This will limit the discovery associated with that issue, and thus decrease the time spent on discovery.
Second, the policyholder’s discovery should be focused. The discovery scope should be limited to what the policyholder needs to prove its case, as opposed to what would be interesting to know about the insurance company and its handling of the claim. The latter is time consuming and does not significantly advance the policyholder’s case. For many insurance claims under general liability policies, the policyholder’s prima facie case consists of proving the policies, that the premiums were paid for the policies, that there was an “occurrence” for which timely notice was given, that the policyholder was damaged as a result of the occurrence, and the amount of the damages. For a declaratory judgment action where the damages are in the future the policyholder does not even have to prove damages. Therefore, much of the information needed to prove those elements is in the policyholders’ possession. If the insurance companies have asserted defenses that the policyholder needs to address, generally, most of the relevant information is also in the policyholders’ possession. For example, in an environmental insurance coverage case, the insurance companies often assert the defense that the damages were expected or intended by the policyholder. The information surrounding that defense should be in the policyholder’s possession. It should not need discovery from the insurers to determine how the area became polluted.
Finally, avoid discovery fights with the insurance companies. Often, the discovery sought by the insurance companies appears to be overbearing and of arguable relevance. In at least some circumstances, policyholders may find it better to provide that discovery without a fight (subject, of course to appropriate objections). Discovery fights are time consuming and expensive. To the extent they can be avoided, they should be. If the insurance companies want some information that has little or no relevance to the claim, the quickest route is to give it to them. Not only does this avoid a time-consuming discovery battle, but it will demonstrate to the court the policyholder’s good faith in providing information in the event there is a later discovery battle that cannot be avoided.
One major problem facing policyholders is shortening the period from when they make their claim to when they get paid. In the context of insurance coverage litigation, limiting the issues by using summary judgment motions, being very focused in the discovery the policyholders seek, and avoiding discovery battles in connection with the insurers’ discovery requests should significantly shorten that time period.