Pre-litigation costs—costs incurred to defend a claim that a company knows will be made against it but prior to the point that its insurer assumes the defense—often are significant and unavoidable. Events that result in claims typically happen without warning, and when a tragedy strikes, companies must respond immediately. Depending upon the situation, civil and criminal procedural rules may impose immediate duties to preserve evidence, adverse publicity may taint the jury pool, and potential plaintiffs will ride the proverbial coattails of governmental investigations to develop cases.
Faced with these situations, companies are often forced to immediately retain counsel to manage their liability exposure. The problem, however, is that insurance companies often decline to pay for an insured’s pre-litigation defense costs—especially if the insurance company is not in control of the defense. In those situations, the insured can be left funding its own defense until plaintiffs actually file suit. This article discusses how a company can maximize its ability to recover pre-litigation costs by avoiding common and costly mistakes.
A Matter of Timing
