Recently, I was asked to look at coverage for a case where the insurer had denied a duty to defend several years before. We concluded that the insurer should have been defending based on certain allegations in the complaint and asked it to reconsider. In the meantime, though, a successful partial summary judgment motion had dismissed the only covered claims. There is good law to suggest that the duty to defend should continue, but the client could have avoided an unnecessary fight had she retained coverage counsel at the outset.

In another case, the insured tendered coverage under a general liability policy and coverage was denied. The client went back and forth with the carrier over the denial, until he asked us to get involved. Given the allegations in the complaint, we asked if the client had a media liability policy that might provide coverage. This is a less common and well-known policy that fills certain gaps in a general liability policy’s “advertising injury” coverage. The client did and the carrier acknowledged a duty to defend. But a year had gone by during which the client paid substantial defense costs that could have been paid by the carrier.

More than once in recent memory, a client facing a wrongful termination claim has asked us to review coverage. Most companies now carry employment practices liability policies. Unlike general liability policies, these “claims-made” policies contain strict and enforceable deadlines for reporting claims to the insurer. In these policies, too, a demand letter – not just a complaint — can trigger the need to report or lose coverage. Sadly, in several cases we have had to tell the client that the failure to report left them without coverage.

The lesson for anyone defending a claim or suit is: Consider insurance coverage early and often and do not assume you can sort it out without coverage counsel. Experienced policyholder counsel can review a complaint or demand letter quickly and assess the steps needed to preserve coverage. The need arises especially at the outset of any claim, but as the first example above attests, coverage advice at critical junctures in the case can help ensure that coverage will continue to be there.

One California Supreme Court decision, and one treatise, highlight the risk. The case is Jordache, Inc. v. Brobeck, Phleger & Harrison, 18 Cal. 4th 739 (1998), where the Court ruled that the statute of limitations had run on a malpractice action against Brobeck. But for that decision, Brobeck faced liability for failing to investigate coverage or tender defense of a case where, the client discovered three years later, coverage arguably applied. Notably, courts in other states have regularly held that it is at least an issue of fact as to whether defense counsel owes a duty to advise her client on insurance coverage issues, absent an express disclaimer in the engagement letter of any such duty.

The treatise is Justice Croskey’s three-volume California Practice Guide: Insurance Litigation (Rutter Group). A quick glance through it underscores just how complex insurance coverage law has become in the last thirty years.

In this area of the law, it’s what you don’t know that will come back to haunt you.