Liability rolls downhill. Big companies use their negotiating leverage to demand favorable indemnification clauses and hold harmless agreements be included in their vendor and customer contracts. Some degree of this is reasonable, but there are always a few players who try to push things as far as possible. The result is indemnification and hold harmless provisions that seem to foist all the liability on companies with less leverage without regard to fault or negligence. Many go so far as to seek that the second party indemnify the first party for the first party’s own negligence.
Intellectual property increasingly constitutes a significant portion of the value of most businesses. Businesses, as a result, have become quicker to sue to protect their intellectual property. Copyright lawsuits and other types of infringement claims can be very expensive. The attorney’s fees alone in such suits can easily surpass two or three million dollars even when they involve small businesses. The mere act of defending a copyright lawsuit can easily put a company out of business before the merits of the case are even decided. The extent to which intellectual property infringement claims are insurable depends on the jurisdiction of the suit, the nature of the claimed infringement and the policies involved.
No one wants to have to submit a claim to their insurance company. For businesses, claims can mean increased costs, increased hassle, and loss of control. That unpleasantness can lead to delays and avoidance when handling issues and accidents that could turn litigious. Effective claims management means taking proactive approaches to these issues at an early point- as a set up for the best possible outcome.
The conflicting interests that may exist between an insured and their insurance company when it comes to the defense of a lawsuit have led courts to create rules to ensure everyone’s legal rights are respected. These rules implicate issues like the insured’s right to hire their own attorney or the insurer’s ability to reserve their rights to avoid paying a judgment. The conflicting interests can become particularly thorny when one party wishes to settle a case while the other objects to the settlement.
As companies, states, workers compensation boards, and various federal government agencies grapple with the growing opioid epidemic, litigation against the pharmaceutical companies producing opioids for medical treatment has begun in earnest. Multiple state governments have sued these companies alleging a host of legal violations, often centered around deceptive marketing claims. These lawsuits have in turn caused a number of spin-off actions between insurance companies and pharmaceutical companies to determine the extent to which insurance companies have duties to defend or indemnify the pharmaceutical companies from the ongoing litigation.
Standard commercial general liability policies and umbrella policies cover what is known as “advertising injury.” This coverage applies where a company causes damages to a third party through its advertising, either by defamation, violation of copyrights or trademarks, or violations of privacy rights. As with many types of coverage, however, companies need to understand the exclusions applied to these types of claims to best address their loss exposures.
A lot can happen in the early part of an insurance company’s handling of a claim. The insurer must often begin its own investigation of a claim at the same time it prepares to defend itself and the insured against a potential lawsuit while sometimes also trying to determine what defenses it may have against paying out the claim to the insured. It is common in these situations for insurance companies to issue a reservation of rights letter.
When people traditionally think of insurance loss payouts, they think of indemnity - claims paid out for damage suffered by property or people. Yet commercial liability policies include two separate promises from insurance companies - the duty to indemnify and the duty to defend. The duty to defend requires insurance companies to hire legal counsel and pay the associated legal fees. In theory this duty is simple enough, but in practice it has a number of complications.
Some may remember the movie by this title involving characters who manipulate each other to gain control of a company in order to line their own pockets. However, the use of another’s money to improve your profit margin isn’t always for the unscrupulous. Sound risk management practices call for risk transfer through any number of mechanisms. Contractual risk transfer is one sound risk management practice restaurant and retail store owners must deal with each day.