Insurers make a living by limiting their liability and costs, and understand all too well how to exploit the claims process to accomplish these ends. In this edition of the newsletter, we take a look at cases where policyholders refused to be gamed in the claims process and successfully stood their ground to keep their insurers honest.
In our first case, out of Maryland federal court, an insurer sought to insulate its claim materials from discovery by asserting that attorney participation in generating the materials rendered the files privileged. Although the insurer realized some success early on in this age-old tactic, the policyholder fought back, taking additional depositions that undermined the basis of the insurer’s privilege claims. Based on this new evidence, the court required the insurer to produce months of claims materials that it previously held were privileged. In its decision, the court openly criticized the insurer’s “pattern of gamesmanship” in the discovery process.
In our second case, out of New York state court, a policyholder believed that its insurer had numerous conflicts of interest in defending tort claims against the policyholder. The policyholder took a proactive stand and took the defense away from its insurer. The insurer then filed suit seeking to avoid its coverage obligations altogether based on being shut out of the defense of the cases. The policyholder fought back, filing counterclaims against its insurer for breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of unfair trade practices statutes. The court agreed with the policyholder that, if its allegations were true, they stated valid causes of action, certain of which potentially supported a treble damages award against the insurer.