The Risk of Calculating Risks: Insurers Beware


By: Phil Savrin

Creative plaintiff lawyers are always looking for ways to increase recoveries against insurance companies beyond the scope of coverage for the loss or the liability limits.  Aided by the courts, insurers must traverse such landmines as timely reservation of rights and waiver of defenses by inaction to enforce the terms of policies.  In addition, an unreasonable or premature settlement demand within policy limits can expose the insurer to liability for the full amount of a judgment regardless of the limits of the policy.  A newer tactic that is rearing its head is a contention that the insured relied on a risk analysis performed by the insurer, either in the underwriting process or as a business courtesy, to believe that its policies and procedures complied with safety standards and regulations.  Although the insurance company analyzes the risks for its own purposes, creative lawyers may try to use that analysis to shift responsibility to the insurance company for torts committed by the insured.  These efforts often fail but the exposure is something for insurance company to consider when offering risk analysis services to its insureds.