Pleading To Maximize Insurance Coverage

Is Your Defendant Covered by Insurance?

Usually when we file lawsuits, we must consider who is going to pay for any judgement or settlement.  Often, it may be necessary for liability insurance coverage to exist in order for a judgment or settlement to be collectible. As a result, in pleading and filing lawsuits, a lawyer must consider the extent to which insurance possibly will cover various claims. This means that lawyers must take care to plead in a way that creates the possibility of coverage when doing so can be done ethically. In doing so, a lawyer should keep several principles in mind and consider typical exclusions from coverage.

Principles Of Pleading

Under Rule 8 of the Federal Rules of Civil Procedure and the Alabama Rules of Civil Procedure, a lawyer may plead in the alternative. This means, that a lawyer may plead inconsistent causes of action neither of which could be true at the same time but which each might be true depending on the ultimate development of the facts. This makes sense because we often have very little information at the beginning of the case and it can be difficult to know certain times of knowledge, such as a defendant’s state of mind. Pleading in the alternative let’s us plead alternate theories under which a defendant might be liable. Of course, any pleading must be made in good faith and subject to the requirements of Rule 11.

Some Basic Principles Relating to Insurance

Insurers have a duty to defend and a duty to indemnify. The duty to defend means that the insurer must appoint or pay for counsel to represent an insured. This duty can be very important to a plaintiff because it will ensure that the tortfeasor/defendant is represented by counsel who will be in a position to report on the developments in the case to the insurer and serve as an intermediary for potential settlement discussions.

The Duty to Defend

The duty to indemnify is the duty of an insurance company to settle a claim or pay a judgment. For either of these duties to apply, the policy must provide coverage and there be no applicable exclusion.

The Duty to Indemnify

The duty to defend is determined in most states by the allegations of the pleadings primarily. In Alabama, extrinsic facts can also be used to establish the duty to defend but cannot be used to eliminate a duty to defend. If a complaint alleges covered and uncovered allegations, the insurer will have a duty to defend at least those that are covered. Allegations should be specific and not simply boilerplate. In other words, it is not enough to simply say that a defendant is negligent, but one must also set out facts that support a claim of negligence. It would not be effective to state facts that only support a claim of intentional conduct and then alleged negligence.

The duty to indemnify is determined by the actual facts as they develop. As a result, it often may not be decided until after a verdict is reached. However, as you are conducting discovery it is important to keep coverage in mind.

Types Of Activity Covered by Insurance Versus Activity Not Covered by Insurance

One idea common to all insurance is that it covers fortuitous losses which  are losses that are not planned or expected and are not intended or known in advance by the insured. Broadly speaking, this means that insurance typically does not cover acts that are specifically intended by an insured. Aside from this general statement, there are some typical exclusions that can impact pleading in many cases, including the standard personal injury case or property damage case. Three common exclusions include the intentional acts exclusion, the abuse exclusion, the mold exclusion, and the “your work” exclusion.

The Intentional Acts Exclusion

Most liability policies do not cover intentional acts committed by an insured. Depending on the wording, the exclusion may only exclude harm that was intended to be brought about by the insured or it might exclude any reasonably foreseeable harm that would come about by the action intended by the insurer. Either way, I have seen plaintiffs’ attorneys plead themselves out of coverage in an attempt to make the facts of a complaint sound as bad as possible by only alleging intentional conduct. However, when considering a tort case, a careful attorney will consider ways that the tort could have been committed without intent and possibly merely through negligence or recklessness. We cannot know all of the facts in advance and we should consider the range of possibilities that might be involved in behavior that causes injury.

Assault and Battery Exclusion and The Abuse Exclusion

Policies frequently exclude coverage for assault and battery. Another related exclusion excludes coverage “arising out of sexual molestation, corporal punishment or physical or mental abuse.” As a result,  attorneys should avoid limiting their claims and allegations to these type of events if the facts admit of the possibility that behavior was not an intentional tort but was part of a negligent, careless, or reckless sequence of events.

The Mold Exclusion

Since the early 2000s, many insurance policies, especially commercial general liability policies, have excluded personal injury or property damage caused by mold exposure. In pleading, look for other types of damage to allege besides or in addition to mold. For instance, water damage, other than through groundwater flooding, is covered by property policies. A water loss will necessitate the replacement of large portions of the structure including sheetrock and floor coverings.

The Your Work Exclusion

The “Your Work” exclusion excludes coverage for a contractor’s defective work. It often comes up in the context of buildings or homes that have been completed but then start experiencing problems after occupation by a homeowner or a business. While the defective work, may not be insured, many courts have stated that damaged caused by the defective work is covered. For example, the cost of replacing a defective roof would not be covered but the cost of replacing walls and flooring that were damaged by rain coming in through the roof would be.

Failing to Plead for Coverage Could be Costly

If you fail to keep these basic principles in mind, you may find that the defendant does not have the resources to pay any judgment and that your judgment is worthless. While you might be able to advertise this judgment on a billboard, it won’t keep your doors open. It might be helpful to periodically review a standard homeowner’s liability form, automobile liability form and commercial general liability form from time to time to remind yourself of pleading pitfalls to avoid. Of course, if you don’t want to do this, contact us. For a flat fee, we can help you determine available coverages and plead in a way designed to maximize any available coverage.