Check Your Insurance

Many businesses carry one or more kinds of insurance. General liability policies are commonplace and cover things like claims for bodily injury, property damage, personal injury and advertising injury.  (Fun fact: depending upon circumstances, you may be able to get coverage for various types of unfair competition claims under "advertising injury", including trademark and copyright infringement claims.)  "Errors and omissions (E&O)" policies -- also known as "professional liability" policies -- cover claims for negligence in the way you perform your services, even if you're not a licensed "professional" such as a lawyer, doctor, engineer or architect.  "Directors and officers (D&O)" policies cover claims against your officers and directors.  All policies have something to say about how the costs of defending a lawsuit will be covered.

For commercial disputes, I have never, ever seen a lawyer (except for me) tell a client at the outset of a case that the client ought to check its insurance policies for possible coverage. Why? My guess is that they're not on the list of insurers' approved counsel, and insurance companies are notorious cheapskates when it comes to paying the full freight of outside legal fees. These lawyers fear that the client will accept whatever law firm the insurer sends them to on the theory that both the legal fees and the loss are covered (assuming the coverage is sufficient in amount), and that the regular lawyer won't get the business. That kind of thinking is not in the client's best interest.

Clients deserve to know what the various choices are: what will be both the benefits and costs of any proposed defense strategy, and the strategy includes picking the lawyer and making a claim against the insurance policy.  It may well be true that making a claim against the policy will raise the client's  future premiums and may even impair its ability to get coverage in the future. But that's the client's choice to make, not the lawyer's.

The client also ought to know that they don't necessarily have to take the insurer's choice of lawyer.  Many policies simply include defense costs as part of the overall policy limit; the client can decide (within reason, and with the insurer's consent) whether to spend on legal fees (reducing the amount available to pay in a possible settlement) or vice versa.  The decision is going to turn on an assessment of what the likely course of the litigation is, the probabilities of the various outcomes, and the downside/upside of the various outcomes.  Again, it's the client's informed choice that matters.

I'm straightforward with clients when it comes to insurance.  I tell them to check their coverage.  They don't have to hire me and they appreciate knowing the full landscape.  I hope that they'll be back when they need me.