Originally published on PropertyCasualty360 (June 25, 2014)

Gather All Information and Document Everything

The duty to cooperate means keeping and turning over pertinent documents and doing so as soon as possible. Again, prejudice rules generally apply, but doing it right may help eliminate the argument. When a loss occurs, therefore, gather every scrap of information pertaining to it and err on the side of providing more documentation than you think is necessary or even reasonable. This will help your insurance company, which may be trying to satisfy the demands of its reinsurer (and is required even when this is not the case). If the requests for information are unreasonable, write to your insurance company and ask what it really needs to confirm coverage.

Keep the Insurance Company On Board as You Negotiate Settlement

Insurance companies often deny coverage on grounds that the policyholder failed to cooperate with their investigations of a claim or deprived them of the right to "associate" in the defense or settlement of suits. These defenses generally allege failure by the policyholder to provide necessary information.

To avoid this pitfall, invite the insurance companies to meet periodically to discuss developments in the suits, and offer to make all nonprivileged documents available for inspection. Carefully document these efforts in letters to the insurance companies to create a strong record of cooperation. 

The policyholder can forestall the argument that it deprived its insurance companies of a right to associate in the defense by inviting them to offer their views as to how the cases should be defended. Chances are, the response will be "Act like a reasonable uninsured company would." This gives the policyholder the freedom to proceed on a rational basis.

Even if an insurance company refused to participate in the settlement process and never committed to providing coverage, it may argue it had the right to accept or reject a settlement.  This potential problem can be dealt with by conditioning any settlement on insurance company approval, while reserving the policyholder's right to waive that condition if insurance company consent is not given. 

If the plaintiffs will not accept a conditional settlement, the agreement should not be consummated without first presenting it to the insurance companies. Failure to give the insurance company a reasonable opportunity to consider a proposed settlement can result in the forfeiture of coverage.

Be Assertive -- and Cooperative

Throughout all these stages of claim handling, providing copious documentation and clear, forceful requests for action can be seen as a form of tough love. The policyholder should simultaneously be closing off avenues for claims denial or delay while aiding the insurance company's procedural needs -- and, ideally, its reinsurance claims efforts. Exerting pressure, while cooperating with legitimate demands, is the best formula for avoiding litigation.

Robert M. Horkovich (rhorkovich@andersonkill.com) is the Managing Partner of Anderson Kill P.C., a national law firm. He is a trial lawyer with substantial experience in trying complex insurance coverage actions on behalf of corporate policyholders and has obtained over $5 billion in settlements and judgments from insurance companies for his clients over the past decade.

Finley T. Harckham (fharckham@andersonkill.com) is a Shareholder in the firm's New York office. He regularly represents corporate policyholders in insurance coverage matters and has successfully litigated, arbitrated and settled hundreds of complex coverage claims, including those involving property loss, business interruption, directors and officers liability, construction, professional liability and general liability claims.

About Anderson Kill

Anderson Kill practices law in the areas of Insurance Recovery, Commercial Litigation, Environmental Law, Estate, Trusts and Tax Services, Corporate and Securities, Antitrust, Banking and Lending, Bankruptcy and Restructuring, Real Estate and Construction, Foreign Investment Recovery, Public Law, Government Affairs, Employment and Labor Law, Captive Insurance, Intellectual Property, Corporate Tax, Hospitality, and Health Reform. Recognized nationwide by Chambers USA for Client Service and Commercial Awareness, and best-known for its work in insurance recovery, the firm represents policyholders only in insurance coverage disputes - with no ties to insurance companies and has no conflicts of interest. Clients include Fortune 1000 companies, small and medium-sized businesses, governmental entities, and nonprofits as well as personal estates. Based in New York City, the firm also has offices in Ventura, CA, Philadelphia, PA, Stamford, CT, Washington, DC, Newark, NJ and Dallas, TX.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.