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Insurance Company Denies Claim Renowned Philadelphia Attorney Advises Fight Back!
This article was authored by attorney Sheryl L. Axelrod, of The Axelrod Firm, PC.
The Axelrod Firm, PC is a Philadelphia, Pennsylvania law firm established for the purpose of assisting individuals, businesses and non-profit organizations with commercial, real estate and employment issues. Sheryl L. Axelrod is the owner of the three attorney, state-certified, woman owned law firm. As few as 5% of lawyers per jurisdiction are recognized by their fellow lawyers as Super Lawyers, Sheryl L. Axelrod has been recognized as a Super Lawyer for the third year in a row. Attorney Axelrod is the President of the Temple Law Alumni Association (TLAA), its 4th female President in its over 95 year history.
It frequently happens. A business owner purchases an insurance policy to protect the business. You pay your premiums in a timely manner, year after year. Then one day, your business is at the wrong end of a lawsuit. You quickly submit the claim to your insurance carrier and expecting they’ll cover it. They’ll hire a lawyer at their cost (after you pay any deductible), and the lawyer will defend your company. After all, that’s why you’ve been paying all those premiums, to get that coverage. However, a few weeks later, you receive a letter s in the mail. Your carrier is rejecting the claim and now you’re the one who must foot the bill to pay for, defend and fight the lawsuit. This is what you should do to effectively fight back.
1. Assess the battleground
Review your insurance company’s claim rejection letter; review as it compares to your insurance policy. Your policy is your insurance carrier’s contract with you; your carrier must adhere to the terms of the contract. The letter will detail your carrier’s grounds for denying coverage. The letter will typically will refer to specific policy language. When you crosscheck the letter against the policy, don’t just look at the policy provisions your carrier references. Read the entire policy; see how its terms are defined and get an understanding of the scope of coverage — which acts and damages the policy covers, and which it does not.
In Pennsylvania, unless it is absolutely clear that your carrier does not have to provide your enterprise with coverage, your carrier generally has to provide coverage. Courts interpret contracts against their drafters. In the case of insurance policies, the drafters are virtually always the insurance carriers. When courts interpret a policy against the carrier, they interpret ambiguous terms — provisions that can mean more than one thing — in favor of providing the insured, your business, with coverage. So if the policy could be construed to call for your carrier to defend the lawsuit, your policy will be construed to require your carrier to do so. In short, courts will read the policy in the way most likely to provide your business with coverage.
The carrier will attempt to confuse you claiming the policy does not demand it to indemnify a claim. We are talking about whether the policy requires the defense of a claim, whether the policy calls for the carrier to hire a lawyer to defend your company. Whether your carrier has to pay a judgment that could be entered against your business (indemnification) is a separate question.
2. Fight back
If you conclude that indeed, your policy could reasonably be construed to require your company’s defense, write your carrier back. Set out why the policy requires your carrier to defend the lawsuit, quoting specific policy provisions which call for coverage.
It can be an act of “bad faith” for a carrier to refuse to defend a claim covered by a policy, and if your business wins a bad faith claim against a carrier, the carrier may have to pay your company not only compensatory damages, but punitive damages. Compensatory damages are the monies your business actually incurs from the having to defend the claim (the legal fees and costs of the suit). Punitive damages may be also imposed to punish a carrier so in the future, it will be more likely to defend such a claim rather than forcing its insured to defend it and have to sue to get reimbursed. If you truly believe your carrier’s refusal to defend your company is being made in bad faith, tell them so in the letter but be prepared to back that up with a claim against your carrier should it refuse to budge.
3. Keep your eye on the clock
Whatever you do, do not let the time your company has to file a response to the lawsuit run out. In Pennsylvania courts, you may be able to file either an Answer to the Complaint or a pleading to have the Complaint stricken. Call the opposing party’s attorney. Do not mention anything about the merit (or lack of merit) of the lawsuit, but say you are trying to get your insurance carrier to hire a lawyer for you. Ask for a reasonable extension of time to Answer the Complaint or otherwise plead. If the lawyer grants the extension, confirm it in writing. This way, you will retain the ability to have the Complaint stricken while you try to get your carrier to hire a lawyer to represent your company. In the meantime, don’t procrastinate. Seek legal assistance. Find a lawyer to represent your business in the lawsuit — preferably, one who will also help you force your carrier to comply with the contract to provide coverage for your business.
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