Here I am again hectoring litigators about their obligations to determine whether or not their clients have insurance, to decide whether that insurance might cover the claim or suit against them; and, make a timely demand for coverage, particularly under E& O claims made policies.

Professionals and business people hesitate before tendering "claims" to their insurance carrier because the no. 1 response to conflict is denial.  This is particularly true where a professional's or business person's competence has been called into question.  You don't want to admit that you might have committed malpractice to yourself let alone to your insurance carrier.

This is a particular problem for professionals because Errors and Omissions insurance generally requires claims to be both made and reported during the policy period.  Often, litigators don't see clients until after they've been sued and clients generally don't get sued unless there's a previous demand letter (i.e., a claim). 

So what's the very first thing litigation counsel must do?  Get a copy of the E&O policy and the first demand letter.  Tender the defense and indemnity of the action to the carrier immediately.

You might get a little fudge room by reporting the claim when suit is filed, but if your insured doesn't report the claim in its application for coverage the following year, the carrier will deny coverage on the ground of non-disclosure.

Come to think of it -- transactional attorneys should remind their clients of their obligations to report claims when made, no matter how feeble the claim may look.  Take a look at yesterday's ruling on what constitutes a claim with thanks to the Met News for the summary and LACBA for the daily email summaries.

Where policy defined a "claim" as a written demand for civil damages or other relief commenced by the insured’s receipt of such demand, a letter from a third-party claimant’s attorney to insured informing insured that the third-party claimant had been subjected to discrimination and received a right-to-sue letter and suggesting a settlement constituted a claim. Although the letter did not expressly demand payment or refer to any specific amount, the meaning was clear that, absent some form of negotiated compensation, the claimant would sue. Where policy stated that all claims arising from the same events or series of related facts could be deemed a single claim, and third-party claimant filed litigation authorized by the right-to-sue notice mentioned in the letter, the lawsuit was part of the same claim as the letter under the policy. Where insured did not notify insurer of the claim until after the lawsuit was filed, insurer’s notification was untimely, and insurer was not required to tender a defense.

Westrec Marina Management, Inc. v. Arrowood Indemnity Company - filed June 16, 2008, Second District, Div. Three, Cite as 2008 SOS 3511, Full text http://www.metnews.com/sos.cgi?0608%2FB195047.