Case In Point: Repairing the damage of Late Notice
A large insurance carrier contacted us to help them with a potentially devastating situation.
It seems they failed to promptly send a disclaimer or reservation letter notifying a large policy holder of the fact that a catastrophic loss was
not covered by their $5 million policy. This critical document had still not gone out two years after the claim was submitted.
The particular loss involved serious injuries to two children. The disclaimer would have relied
on a policy exclusion that probably applied. The insured faced a potential $10 million judgment if the underlying case went to trial.
The carrier faced the distinct possibility that it might well have to pay the entire $10 million because of their delay in notifying the insured
of the disclaimer. New jersey law recognized the potential for extra-contractual liability in certain instances, so that the policy limits would not even apply.
We were assigned the case and asked to find a way of minimizing the potential damage to the
carrier. Our first action was to make an assessment of the dynamics of the underlying lawsuit. We carefully analyzed the emotional,
psychological, medical and financial factors involved. We thoroughly articulated and reviewed the concrete objectives of the childrens'
guardians and their legal representatives. Then we devised what we determined to be a viable strategy.
We assembled a team of lawyers from within our firm to organize the case, work with insurance
experts, and prepare summary judgement, trial and appellate briefs. Given the sympathetic claimant, we also focused on developing the best possible
record for a likely appeal. Overall, we plotted a strategy ( with the authorization of the broker and their own insurance carrier ) which was
extremely daring. In short , the decision was made to not present witnesses at trial. Part of the strategy was to avoid having the Appellate Division
review potentially damaging testimony which might have emerged during cross-examination. We tried the case on that basis, focusing on the legal issues
and certain factual weaknesses in the plaintiff's case. And when the plaintiff rested, we rested.
We first had our carrier/client agree to fund some type of settlement with the Plaintiffs, leaving for
another day to ultimate insurance coverage dispute between the insured and the carrier. We managed to convince the Plaintiffs that: 1) There was no
insurance coverage for the type of claim presented; and, 2) if the claim remained at the $5 million level with no insurance coverage available, then the
client might file for bankruptcy leaving Plaintiff no way to collect any amount. This strategy resulted in Plaintiffs viewing us as their advocate in some
respect, especially since they were unable to make any headway working directly with the insured. With the authority of the carrier, we were able to settle
the underlying case with Plaintiffs for approximately $2.4 million. Then, through some tough negotiations we were able to get the insured to agree to
absorb $1.2 million of that award, in compromise of the insurance coverage claim.
