Photo of Mary McCutcheon

Mary McCutcheon represents policyholders in insurance coverage disputes arising out of: securities investigations, class actions and derivative actions, venture capital and private equity litigation, intellectual property and technology errors and omissions lawsuits, highly sensitive employment claims, mass casualty personal injury actions and construction defect claims.  She also represents companies in business interruption and property damage claims arising out of natural disasters such as earthquakes and fires.  Ms. McCutcheon is known for the placement of directors' and officers' liability, management liability and financial services liability insurance and related indemnification issues and handling claims under those policies.  She is a founding member of the American College of Coverage Counsel and chairs Farella's Construction and Insurance Department.

I recently participated in a panel at the Association of Business Trial Lawyers Annual Meeting – “Bad News Delivered: The Board Meeting and Crisis Management.”  Among other topics, the panel discussed the role of insurance counsel in crisis management, and addressed the following questions:

Who Is The Client? 

When meeting with a board in a time of crisis, it is critical to identify whether your client is the company or the board.  And if it is the company, the board must understand that while they are the decision-makers for your client, they themselves are not your clients.

Depending on whom you represent, your advice and strategy may differ.  Although acting on behalf of the company and bound by fiduciary duties and the duty of loyalty, in a time of crisis board members may be concerned about how the company’s insurance can be used to protect their interests, as opposed to the company’s.  If counsel is representing the company, the strategy may focus on preserving the coverage to settle a nasty case, fund burdensome defense or investigation costs, or protect individuals who are critical to the company’s on-going business strategies.  And if the company is in bankruptcy, the debtor in possession or trustee may want to preserve the assets for claims against the estate, as opposed to lower priority indemnity claims or non-indemnifiable claims against individual insureds such as board members.

If counsel is representing an individual, he or she may have the luxury of an indemnification from the company – assuming the company is able to fulfill it.  If not, counsel may need to invoke Side A or other provisions in the policy to preserve the policy limits for the individual directors or officers, and access to much-needed defense costs. Continue Reading Insurance in a Time of Crisis: Role of Insurance Counsel in Crisis Management

I recently participated in a negotiation with an insurer who had denied coverage for an underlying errors and omissions claim in the mid-seven figures. The insurer’s counsel and I exchanged stern letters, each explaining why our respective client’s position was absolutely correct, and the other’s absolutely wrong. The client’s broker arranged a meeting with principals and counsel on both sides. At the meeting, the insurer’s counsel and I debated our respective positions once more. Neither of us conceded any possibility that the other could be right. After 25 minutes, my client put a stop to the debate competition and, aided by the broker, moved into negotiations with the insurer’s principal.

The opening offer and demand were miles apart. But within an hour, the case settled, to the clear satisfaction of both sides. With no mediator. No wrangling about which mediator to select. No waiting three months to get a date on the mediator’s calendar. No mediation briefs or reply briefs. No waste of non-refundable mediator’s fees. No shuttle diplomacy, bracketing or mediator’s proposals. No mediator reserving jurisdiction to hammer out disputed settlement terms. It felt almost too easy.

Are lawyers too dependent on mediators to settle their cases? Whether you answer that question yes or no, there are many situations where a neutral can resolve a case where party negotiations would fail. This is particularly true in a “three-way” mediation, where the defendant’s insurer is participating but is reserving rights, denying coverage, or rejecting defense counsel’s settlement recommendations. These mediations present unique challenges that require a skilled mediator and savvy defense and coverage counsel. Continue Reading A Policyholder Perspective on the Unique Challenges of a Three-Way Mediation

Farella’s Insurance Recovery Group lawyers regularly collaborate with and learn from different players and functions within the insurance industry. To provide more value to our readers, we have reached out to a series of insurance brokers to create the Insurance Broker Series Q&A.

Our latest installment is with Michael Ferraro, Partner & Senior Vice President with Woodruff-Sawyer & Co.  Continue Reading Insurance Broker Series: Michael Ferraro, Woodruff-Sawyer & Co.

Farella’s Insurance Recovery Group lawyers regularly collaborate with and learn from different players and functions within the insurance industry. To provide more value to our readers, we have reached out to a series of insurance brokers to create the Insurance Broker Series Q&A.

Our latest installment is with Clark Morton, Partner & Senior Vice President with Woodruff-Sawyer & Co.  Continue Reading Insurance Broker Series: Clark Morton, Woodruff-Sawyer & Co.

Farella’s Insurance Recovery Group lawyers regularly collaborate with and learn from different players and functions within the insurance industry. To provide more value to our readers, we have reached out to a series of insurance brokers to create the Insurance Broker Series Q&A.

Our latest installment is with Manpreet Gill, Managing Director, Communications, Media & Technology Practice Leader, Western Region with MarshContinue Reading Insurance Broker Series: Manpreet Gill, Marsh

Farella’s Insurance Recovery Group lawyers regularly collaborate with and learn from different players and functions within the insurance industry.  To provide more value to our readers, we have reached out to a series of insurance brokers to create the Insurance Broker Series Q&A.Gardner Jones

Our latest installment is with Gardner Jones, Vice President with ABD Insurance and Financial Services. Continue Reading Insurance Broker Series: Gardner Jones, ABD Insurance and Financial Services

Farella’s Insurance Recovery Group lawyers regularly collaborate with and learn from different players and functions within the insurance industry. To provide more value to our readers, we have reached out to a series of insurance brokers to create the Insurance Broker Series Q&A.

Stephen Leveroni

Our latest installment is with Stephen E. Leveroni, Executive Vice President / Founding Principal of ABD Insurance and Financial Services.

Continue Reading Insurance Broker Series: Stephen Leveroni, ABD Insurance and Financial Services

Farella’s Insurance Recovery Group lawyers regularly collaborate with and learn from different players and functions within the insurance industry.  To provide more value to our readers, we have reached out to a series of insurance brokers to create the Insurance Broker Series Q&A.Cris Christensen

Our latest installment is with Cris Christensen, Senior Claims Consultant with ABD Insurance and Financial Services. Continue Reading Insurance Broker Series: Cris Christensen, ABD Insurance and Financial Services

Farella’s Insurance Recovery Group lawyers regularly collaborate with and learn from different players and functions within the insurance industry. To provide more value to our readers, we have reached out to a series of insurance brokers to create the Insurance Broker Series Q&A.

Our first installment is with Winnie Van, Claims Counsel, SVP and Principal of ABD Insurance and Financial Services.

Continue Reading Insurance Broker Series: Winnie Van, ABD Insurance and Financial Services

settlement-statementFor decades, California courts have mandated that an insurer is obligated to accept a “reasonable” settlement demand within policy limits on behalf of its insured. If it fails to do so, it is liable for the entire judgment, including amounts in excess of the policy limits. Comunale v. Traders & Gen. Ins. Co. (1958) 50 Cal.2d 654, 659. Subsequent cases have addressed whether an insurer can escape excess liability if its decision-making process, as opposed to the settlement itself, was “reasonable”. California law is clear that even an honest mistake as to whether the claim is covered does not absolve an insurer from excess liability. Johansen v. Calif. State Auto Association Inter-Ins. Bureau (1975) 15 Cal.3d 9, 15-16. However, courts have also considered whether an insured must show the insurer acted “unreasonably” in assessing the value of the claim. In Crisci v. Security Ins. Co. of New Haven (1967) 66 Cal.2d 425, 431, the California Supreme Court held that the very fact of an excess judgment created an inference that the insurer was liable for the excess judgment. Other cases, however, looked at whether the insurance company properly investigated all facts relating to liability and damages. See, e.g., Betts v. Allstate Ins. Co. (1984) 154 Cal.App.3d 688, 707. Continue Reading Insured May Bear the Consequences of Insurer’s Negligence