Every year, when your liability insurance premium comes due, you
silently curse at the thought of paying it yet again--after all,
you've been in business seven years without a single incident.
But you want to be protected, so you send the check out and go back
to running your business.
But if one day you do find yourself the target of a claim or
lawsuit, what will your insurance company do? It'd better do
everything, you say--after all, you've paid a lot of money for
this protection.
Well, in most cases, your insurance policy will come to your
rescue. Of course, it depends on the specific type of coverage you
have, but in general, you can expect your insurance company not
only to pay the final judgment or claim, but also to pay for your
defense. That's why it's important to get your insurance
carrier involved whenever you have an incident that could result in
a claim before it becomes a lawsuit, says Lance LaBelle, an
attorney with Berger, Kahn, Shafton, Moss, Figler, Simon &
Gladstone in Irvine, California. "You want to put the
insurance carrier on notice as soon as you suffer a loss or someone
makes a claim," he says.
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You may have more than one carrier for liability insurance; for
example, your directors' and officers' coverage may be with
one company, and your general liability with another. Notify all
your insurers, LaBelle advises. You can usually do this through
your agent. And don't just guess which policy will cover what;
let the insurance companies sort it out.
Once they receive notification of the claim, your insurance
carriers will respond in one of three ways:
1. They'll tell you your policy doesn't
cover the particular situation you're in, and they're not
going to defend you;
2. They'll agree to defend you under the
"reservation of rights," meaning they'll pay for your
legal expenses, but they might not ultimately pay a settlement or
judgment; or
3. They'll defend you without the reservation of
rights, which means they'll pay your legal costs as well as any
settlement or judgment (up to the limits of your policy).
Of course, even if your insurance company is handling your
defense and will likely pay the final settlement or judgment,
don't just sit back and relax. You have an obligation under the
terms of the policy to cooperate with the defense and assist the
insurance company in reaching a favorable outcome. And obviously,
it will be in your best interests to do so.
Contact Source
Berger, Kahn, Shafton, Moss, Figler, Simon &
Gladstone, (949) 474-1880, http://www.bergerkahn.com