Page 1 Recording of this session via any media type is strictly prohibited. TOP 10 MISTAKES TO AVOID WHEN A LIABILITY CLAIM COMES IN

Page 2 Recording of this session via any media type is strictly prohibited. Sarah E. Millin Partner & Insurance Co-Chair Lathrop & Gage LLP Kansas City, Missouri Robert C. Vryhof Vice President, Risk Management Republic Services, Inc. Phoenix, Arizona

Page 3 Recording of this session via any media type is strictly prohibited. What to Expect How to ensure all relevant liability coverage is in play as soon as possible How to work with insurers after tender to maximize their contribution How to protect confidential and privileged communications when insurance is involved

Page 4 Recording of this session via any media type is strictly prohibited. 1. Overlooking Potentially Covered Allegations in the Complaint Dissect the complaint o Identify all possible claims and damages o Sometimes covered allegations are not obvious o Insured only needs one potentially covered claim to trigger defense Study each paragraph – do not skim Don’t rely on headings Assume only necessary bad elements Resolve all doubts in favor of coverage

Page 5 Recording of this session via any media type is strictly prohibited. Coverage-Triggering Allegations MAY NOT BE COVERED: “PETITION FOR PRELIMINARY INJUNCTION, PERMANENT INJUNCTION, AND CIVIL PENALTIES” BUT WHAT ABOUT: “... is liable for costs... ” “... has caused damages... ” “... and grant such further relief as the court deems just and proper.” MAY NOT BE COVERED: “... fraudulent marketing scheme of the Defendants... ” “... failed to disclose known side effects... ” BUT WHAT ABOUT: “... knew or in the exercise of reasonable care should have known of the defective nature... ” MAY NOT BE COVERED: “... action seeking to declare the invalidity of a patent and to recover damages for patent infringement, misappropriation of trade secrets, and unfair competition... ” BUT WHAT ABOUT: “... damage and injury by spreading false rumors... ”

Page 6 Recording of this session via any media type is strictly prohibited. 2. Ignoring Extrinsic Evidence That May Trigger Coverage Look outside the complaint where permitted o The complaint often does not tell the entire story o Many jurisdictions require the insurer to consider all extrinsic evidence available o Only some jurisdictions allow carriers to deny coverage based on extrinsic evidence

Page 7 Recording of this session via any media type is strictly prohibited. Ignoring Extrinsic Evidence That May Trigger Coverage Remember that a “suit” is not always necessary to trigger a defense obligation o Some liability policies only require the assertion of a “claim” o May not have to be in writing – a verbal demand or allegation of liability may suffice o Even where policy requires a “suit,” some jurisdictions interpret that word broadly

Page 8 Recording of this session via any media type is strictly prohibited. Ignoring Extrinsic Evidence That May Trigger Coverage If the insurer denies, forward each later document that may trigger coverage o Amended pleadings o Written discovery responses o Deposition transcripts o Anything that establishes the potential for coverage

Page 9 Recording of this session via any media type is strictly prohibited. 3. Failing to Identify All Potentially Applicable Policies Look for coverage in unlikely places o Auto accident damages under CGL? o TCPA damages under D&O? Remember that multiple lines may apply Remember to tender under all potentially applicable coverage years Find missing policies by using secondary policy evidence o Archaeology -- find lost or missing policies o Reconstruction -- establish terms of missing, incomplete or illegible policies Seek coverage under policies as an additional insured

Page 10 Recording of this session via any media type is strictly prohibited. 4. Failing to Properly Notice Claims Benefits of proper notice o Eliminates prejudice argument o Avoids disputes over pre-tender defense costs o Preserves rights

Page 11 Recording of this session via any media type is strictly prohibited. Failing to Properly Notice Claims The Basics o Notify promptly under every potentially relevant policy o Follow specific policy provisions o Provide basic, factual information and avoid unnecessary characterizations o Attach demand, complaint, summons or other coverage- triggering document o Even a “soft-tender” may be sufficient

Page 12 Recording of this session via any media type is strictly prohibited. Failing to Properly Notice Claims “Claims-made” policies o Pay particular attention to terms and deadlines o Don’t ignore claims-made excess coverage o Notice may be required before suit o Check for notice provisions on potential claims o “Claims-made” and “claims-made- and-reported” often treated the same

Page 13 Recording of this session via any media type is strictly prohibited. Failing to Properly Notice Claims Notice as an additional insured o Notify carrier directly o Don’t rely on named insured o Even if named insured provides notice, may not constitute notice on your behalf o Obtain, at a minimum, certificates of insurance

Page 14 Recording of this session via any media type is strictly prohibited. 5. Not Preparing for the Possibility of a Declaratory Judgment Action In some states, carriers must file a DJ action or risk waiving defenses Carriers may file quickly to select favorable forum Get legal involved early and consider options o May need to file suit upon tender o Use “soft-tenders” if uncertain whether to pursue claim

Page 15 Recording of this session via any media type is strictly prohibited. 6. Not Responding to Reservations of Rights and Denial Letters Specifically object to unsupported reservations and denials o Can voice objections using amicable tone o Prevents disputes down the road o Always object to reimbursement/recoupment reservation o Often reserved o Check policy to see if allowed o Failure to promptly object might create “implied-in-fact” contract

Page 16 Recording of this session via any media type is strictly prohibited. Not Responding to Reservations of Rights and Denial Letters Strategically respond to information requests o Need to cooperate o Reasonableness standards apply o Communicate with carrier regarding content and scope of requests Promptly address unsupported withdrawals o When can an insurer withdraw from the defense? o Can’t so long as the potential for coverage remains o Must show there’s been a material change in circumstances

Page 17 Recording of this session via any media type is strictly prohibited. 7. Accepting Insurer’s Selection of Counsel, Billing Guidelines and Rates Know when to demand your own defense counsel o When reservation creates conflict of interest o Reservations on punitives/excess exposure may even create conflict Rate caps must specifically be stated in policy o Most policies provide for payment of “reasonable rates,” as opposed to specific rate caps Raise practical considerations o Continuing with long-time, highly experienced counsel is often in everyone’s best interests, even if rates are higher Watch for and reject billing guidelines that invade privilege or impede representation

Page 18 Recording of this session via any media type is strictly prohibited. 8. Forgetting to Engage Carriers During Settlement Opportunities Insurers have a “duty to settle” in most states o Must respond to reasonable demands within policy limits o Consequences for breaching the “duty to settle” can be severe o Responsible for the entire amount of any resulting judgment if the case proceeds to trial o Includes damages in excess of policy limits o May include damages outside coverage

Page 19 Recording of this session via any media type is strictly prohibited. Forgetting to Engage Carriers During Settlement Opportunities Inform all carriers of settlement opportunities, even those that have denied Provide details about factors affecting settlement window o Important depositions o Pending motions o Surviving summary judgment Get defense counsel involved Write hammer letters Consider three-way mediations Explore all ways to protect the company’s interests through settlement

Page 20 Recording of this session via any media type is strictly prohibited. 9. Failing to Properly Document Settlement with Insurance Carriers Always commit to writing an insurer’s agreement to pay proceeds Include mutual releases to avoid recoupment Secure release of subrogation rights where required by underlying settlement Expressly preserve rights as to non-settled claims o Particularly important where underlying claim is a class-action Use caution when settling claims for less than policy limits o Check excess policy language o Consider allocating

Page 21 Recording of this session via any media type is strictly prohibited. 10. Wrongfully Assuming Communications are Privileged Communications with brokers o May not be privileged even if counsel involved Communications with carriers o May not be privileged until insurer agrees to defend Use confidentiality agreements o Set forth purpose for exchanging information o Define common interests When in doubt, pick up the phone

Page 22 Recording of this session via any media type is strictly prohibited. Questions, Answers and Final Comments

Page 23 Recording of this session via any media type is strictly prohibited. Sarah E. Millin Partner & Insurance Co-Chair Lathrop & Gage LLP Kansas City, Missouri Robert C. Vryhof Vice President, Risk Management Republic Services, Inc. Phoenix, Arizona