In “Cool Hand Luke,” Paul Newman’s character, finding himself surrounded by the police after his third escape from prison, mockingly delivers the famous line: “What we have here is a failure to communicate.” Upon which, he is promptly shot. Similarly, for many commercial insureds, failure to properly communicate with an insurer, though not mortal as in the case of Luke, can have dire consequences for the coverage they thought they had secured when buying an insurance policy. Part of the problem is the uncertainty surrounding the insured-insurer relationship: is the insurer friend or foe? Unfortunately, the answer is usually known only after a claim arises. But while an insured and its insurer need not walk in lockstep, like in some commercial pas de deux, better communication before binding coverage and after a claim is in the interests of insureds and insurers alike. Communication will go a long way to protect against future disputes (or better yet, future claim denials).
Pre-Claim
The nature and extent of communications with an insurer, even before a “claim” arises, may determine whether the “claim” will be covered once it develops. A recent case, JPMorgan Chase & Co., et al. v. Twin City Fire Ins. Co., No. 600674/06 (1st Dept. March 18, 2010), illustrates this. The case opposed JPMorgan to Twin City, one of the insurers in JPMorgan’s $200 million liability insurance program. The “claims-made” Twin City policy covered claims made during the policy period as well as claims made after the policy period, provided that the insured gave written notice during the policy term of any “Wrongful Act which may subsequently give rise to a claim against an Insured.”
