6 Pitfalls of Mass Tort Claims Management – and How to Avoid Them
Mass tort cases are highly complex, can involve a large number of people and entities, and can drag on for several fiscal years. If your organization is a defendant in a mass tort case, you need to follow an effective process when managing the claims. Not doing so could end up costing your organization hundreds of thousands of dollars – even millions – in lost coverage.
In our experience, following are the 6 most frequent pitfalls that can adversely impact your mass tort claim management.
1. Failure to notice the insurance markets
Insurers often move slowly in response to complex and costly mass tort claims. Therefore, as soon as circumstances that might give rise to a loss or a claim come to light, you should provide notice to the insurer(s). If there is even the slightest hint of potential coverage, contact your insurance broker and request that they notice your current carriers and those known to have placed coverage previously, even if you do not have the actual policy in hand.
Be sure to submit your notice to insurers properly. Coverage policies normally provide detailed instructions regarding how to send a notice and who should receive it. Specifically following these instructions helps to avoid potential coverage disputes down the road.
If you hire a lawyer to respond to a claim, include that information in your notice to the insurer. Request from the insurer immediate acknowledgment and assistance regarding your intentions, as this will further minimize disagreements on what is or is not covered. Keep in mind that coverage often includes defense costs with the carrier potentially having a say over attorney assignment. If you do not have an attorney, the carrier can appoint one on your behalf. It is important to read your policy as some may have provisions regarding attorney appointment.
2. Failure to find responsive coverage
“Find” is the pivotal word in this potential pitfall. As a mass tort case defendant, you need to find all the insurance policies your organization owns and identify any of those that could potentially respond to the events or risks. Many defendants are actually not aware of the insurance coverage they once had. For businesses that have changed ownership or merged over the years, current owners may not know that the original owner had coverage dating back to the claim period.
Maximize your potential coverage by engaging an insurance archaeologist to locate evidence of historical insurance. Even if you do not have the actual policy, carriers have a duty to investigate your claim and determine if they have responsive coverage. To support your claim, share any located evidence, such as broker correspondence, internal records, and accounting records.
Early noticing to an insurance carrier supported by documentation found during an investigation or insurance archaeology, can translate into assumption of, or reimbursement for, hundreds of thousands of dollars in defense fees when it triggers current or historical coverage. It all works in your favor, as long as coverage exists that is responsive to the allegations of the complaint.
3. Failure to consider excess policies
If you are not considering excess policies, you are simply leaving money on the table. Yet, many defendants never notice the excess carrier that can provide another layer of coverage, because this coverage is not triggered by claims. Claims always trigger primary coverage first. In fact, excess policies will not respond until the cost threshold of the primary coverage is reached.
The damages in many mass tort cases can reach well above the primary coverage threshold and into the millions of dollars, making identification of excess policies vital. Make sure you know who the excess carriers are and include both in the noticing and updating of your claim.
4. Failure to comply with the policy
Simply put, insurers can deny coverage when you fail to comply with one or more terms of the policy. Beyond navigating certain policy exclusions such as asbestos or misconduct, etc., you should be aware when policy terms extend beyond what is covered and the coverage period. Many policies incorporate strict terms for timely reporting of a claim, and some even direct the insured to a specialty department for legacy claims. It is not uncommon for a specialty claims department to use its own unique intake method, different from standard coverage lines like general liability or workers compensation.
5. Failure to understand how to juggle multiple carriers
Mass tort claim defendants seldom anticipate the challenges of managing multiple insurance markets – a process that is rarely straightforward. For instance, excess carriers follow protocols that vary, based upon three major criteria: carrier, geography and claim type.
Geography impacts the claims process more than any other criterion. Reporting protocols change by location, with the London, Bermuda, and U.S. markets each having their own specific protocols. By far, filing a claim is easiest under U.S. protocols. With Bermuda carriers, even if the excess carrier has a U.S. counterpart, you must file your claim with the Bermuda carrier, as it is considered to be a different entity from the one operating in the United States.
London serves as the de facto epicenter of excess coverage. Lloyds of London has the major share of the excess insurance market and is the usual concerned entity. The good news is that London markets and brokers commonly retain records back to the 1950s.
6. Failure to know your own story
Many organizations, especially those with long histories or those that have undertaken mergers or acquisitions, do not understand their full corporate genealogy and applicable insurance history. This is particularly true for organizations that did not have a document retention strategy or robust means for transforming and tracking paper-based information into electronic formats during the 1980s and 1990s. As a result, mass tort claim defendants often find themselves surprised to learn that they own valuable assets in never-before-mentioned locations – even in remote storage facilities. Information assets spread far and wide can contain valuable information about ownership, broker history, insurance carriers and other data that can support a potential claim.
As noted in these 6 Pitfalls of a Mass Tort Claims Management, there are a lot of moving parts once a mass tort case arises. Most often, mistakes are made because of a lack of internal expertise and resources. Because we specialize in managing mass tort claims on behalf of defendant organizations, we not only understand the pitfalls but also know how to avoid them. For a more in-depth discussion regarding your own unique situation, please contact us directly.