Alexander H. Berman, Robyn L. Michaelson, and Justin F. Lavella
One of the most basic discovery requests in insurance coverage litigation is for the insurer’s claims-handling documents and coverage analysis. A policyholder suing for insurance coverage is entitled to understand the insurer’s pre-denial coverage analysis, which is after all one of the core business functions of an insurance company along with marketing and selling policies.
Simply put, an insured must be allowed access to all documents held by the insurer, including communications and claim files that might speak to why the insurer denied the claim. In recent years, however, insurers have begun to involve both in-house and outside counsel in these deliberations, and have consequently asserted the protections of the attorney-client privilege and the work product doctrine to shield these critical business documents from discovery.
Fortunately, New York courts are developing a body of case law that properly treats such communications as discoverable. When an insurer communicates with counsel to assist in determining whether a claim is covered in the first instance, such communications are made primarily in furtherance of the insurer’s business function, as opposed to legal advice, and therefore are not immune from discovery. Any resulting memoranda simply reflects the same work that claims handlers have been performing since the establishment of the insurance industry. That the analysis was undertaken by an attorney rather than a non-attorney has no significance in the nature and purpose of the work being performed and the discoverability of the resulting analysis and documents. Continue reading “New York Courts Skeptical of Insurers Seeking to Hide Coverage Analysis as Privileged”
Many corporate executives generously serve as directors and officers of nonprofit organizations. While they are undoubtedly inundated with meetings and workshops focusing on corporate risk management at their day job, they may not consider potential liability arising from their philanthropic work. Just as a corporate director may face lawsuits, even those lacking merit, for allegedly breaching fiduciary obligations to shareholders, so, too, a nonprofit director may face similar allegations of wrongdoing for a broad range of activities including, for example, allegedly permitting the mismanagement of funds or approving an employee’s termination. Even if the director ultimately prevails after a trial on the merits, the nonprofit may not possess the financial means to indemnify her or his legal fees. Before any such issue threatens financial well-being, it is prudent for any individual joining a nonprofit organization to take the time to make sure the nonprofit has appropriate insurance coverage. So what is appropriate coverage?
A governmental entity may initiate an investigation with something as seemingly innocuous as an “informal” request for information, or as ground shaking as armed government officials executing a full-blown search and seize warrant at your company’s headquarters. In either scenario, the ensuing investigation is likely to be expensive, time consuming, and a distraction from your business operations. Any governmental investigation can quickly escalate into an extensive and protracted inquiry that forces your company to spend significant time, resources, and legal fees responding to (and defending against) the government’s investigatory demands. These investigations may also result in subsequent legal or administrative enforcement actions, which expose the company and its directors and officers to potential liability for damages, fines, penalties, and other financial obligations. These actions pose a serious threat to the organization and its top brass, and must be met with a vigorous defense. The crucial question is: How will you pay for your response and defense? The answer may lie with your insurance portfolio.