WHAT DO YOU MEAN WE’VE BEEN SUED?! Third in a Series of Six Articles

You have calculated and calendared the date for your formal litigation response, you have identified the probable actors within the organization who have knowledge about the complaint, and you have taken steps to preserve all records, including electronic records relative to the matters raised in the complaint. What is next? Well, you are going to need legal representation. Here is a smart way to approach this.

Depending what the allegations are in the complaint, you may have insurance coverage for the claim, or at least some part of it. One school of thought is to take the summons and complaint and immediately forward them to the proper claims department as described in your policy documents. (Note that your policy will set out the appropriate method for notifying the company about a claim. Follow it exactly. If it is not required to notify your insurance agent, you can certainly loop them in, but do not fail to follow the notice requirements in your policy.) But when should you put the insurance company on notice? Quickly, but I suggest that you consult with your company counsel about the matter first. While undoubtedly you will report the matter to your insurance carrier in a timely manner, you will want to preliminarily size up what may or may not be covered by insurance. You will also want to identify other issues that might be of particular importance to you, but not necessarily your insurance company, before the report is made. You will also want to review the steps you have taken to preserve records and identify potential witnesses with your counsel irrespective of when you report it to the carrier. Carrier appointed counsel is not likely to be on the scene fast enough to make sure that these very early steps are properly followed.

One of the issues you will want to discuss with your company counsel is whether or not you are comfortable relying solely on counsel selected by the insurance company for your defense. There are instances where there is a need for company counsel to at least monitor the litigation. This can be because the insurance company has denied coverage, has denied coverage as to certain of the claims but allowed coverage as to others, or has simply reserved its right to continue to review the coverage issues while litigation unfolds. Each of these responses has certain risks attendant to it. Additionally, if you have a high deductible or the amount of the claim exceeds the available coverage, you may want to involve your own counsel who will have an eye toward defending the deductible or the excess exposure.

We will talk more about referring the matter to your insurance company in the next article