Masonry Magazine June 2004 Page. 45
Once the application for insurance is approved and the policy is issued, it becomes the "contract of insurance" between the parties and represents the parties' entire agreement as to the nature and scope of the CGL Policy.
The Claims Process
Unfortunately, more likely than not, you will be on the receiving end of a claim or lawsuit at some point, if for no other reason than you were at the wrong construction site at the wrong time. Even in the case where you were merely named (along with every other contractor and subcontractor) as a defendant in a lawsuit based on your presence at the job site, it is imperative that you properly and promptly handle the process of making a claim under the policy.
Once you receive a claim or are served with a lawsuit, forward written notice to your CGL carrier as soon as possible. Throughout the claims process, it is important to err on the side of providing as much information as possible-as soon as possible. Delay in this regard can afford the carrier with a possible defense to coverage under the policy and, in some jurisdictions, the carrier need not establish prejudice to prevail.
Upon receiving notice of the claim or lawsuit, the carrier will perform an investigation and issue a written coverage determination. In theory, a primary CGL Policy will be the first to respond to a new daim or lawsuit, and as a result, the carrier must determine whether there is a potential duty to defend. Because the duty to defend is broader than the duty to indemnify, it is not uncommon for carriers to provide a defense to the claim even if significant questions exist at that time as to whether or not the claim will ultimately be indemnified under the policy. Umbrella and excess policies are potentially triggered only after all applicable underlying coverage has exhausted by the payment of covered claims. Accordingly, you should consider the potential value of your claim, and notify all carriers whose limits may be impacted, even if only under a worst-case scenario.
Typically, the insurer's coverage determination will be to: 1) defend you; 2) defend you under a reservation of rights; or 3) deny coverage. In many instances, the carrier will also issue a request for additional information, either prior to or at the time that it issues its coverage determination. It is important that you comply with such requests as completely and promptly as possible, as the policy also imposes upon you the duty to cooperate. Should the carrier agree to defend you in the litigation, the CGL Policy will dictate the terms of the defense.
In addition to the duty to defend, your CGL Policy may indemnify you for any judgment or settlement of the claim or lawsuit. The duty to indemnify is also impacted by the terms, conditions and exclusions of the CGL Policy. For example, the CGL Policy routinely excludes damages that are the result of the insured's intentional conduct. As a result, that portion of any judgment or settlement that is based on such conduct will not be afforded coverage. Many CGL. Policies also exclude coverage for punitive damages, and as a result, any portion of the judgment or settlement that includes such damages will likewise not be covered. The carrier will memorialize its position on these issues in its coverage determination.
Finally, there will be situations where the parties question or disagree as to whether the CGL Policy provides coverage for a particular claim or lawsuit. In those situations, one or both of the parties can seek a "declaratory judgment" from the court as to whether or not the CGL Policy provides coverage for the underlying claim or lawsuit at issue. In this situation, both parties will retain, at their own expense, separate insurance coverage counsel to represent them in the insurance coverage litigation.
Conclusion
Although many different types of insurance coverage may be appropriate for your business, the CGL Policy is a fundamental type of policy that can protect you in the event of a covered third-party claim. In closing, and in answer to the burning question will you sleep more soundly knowing that your CGL Policy is on the watch? Possibly. The better question - will you sleep more soundly knowing that your German shepherd is on the watch? Absolutely. Although mine still chews my shoes every now and then...
Kristan M. Cassidy, Esq., is a Director with the Washington, D.C. law firm of Jackson & Campbell, P.C. She specializes in insurance coverage litigation with a focus on environmental, toxic tort and construction liability issues. She may be reached at kcassidy@jackscamp.com.
This article is not intended to provide legal advice, but to raise issues on legal matters. You should consult with an attorney regarding your legal issues, as the advice you may receive will depend upon the facts and law of your jurisdiction.
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