Business owners, does the cost of your liability insurance keep going up every year, while your coverage dwindles? Despite the increasing premiums, have you experienced the disappointment of submitting a claim only to have your insurer deny coverage? If so, you’re certainly not alone. Liability insurers have become modern-day Shakespeares when writing exclusions in their insurance policies that remove most, if not all, coverage for the risks faced by business owners every day.
To quote the actual Shakespeare, if your insurer denies coverage, don’t “weep with me, past hope, past cure, past help.” Instead, rely on different Shakespearean advice: “true hope is swift and flies with swallow’s wings,” by which he obviously meant, “Go see your lawyer!” or something like that. Of course, Shakespeare also wrote, “The first thing we do, let’s kill all the lawyers,” but that was in a different play.
A lawyer who is knowledgeable about your business and who also understands insurance coverage can help you navigate an insurance claim where coverage is questionable, or where your insurer has already denied coverage. In fact, ideally you should consult your lawyer before you submit a claim, as the claim submission itself may impact whether your insurer provides coverage. Also, from day one, your insurer will be looking for information that supports a denial of your claim. You need an experienced coverage lawyer who knows what insurers are looking for to assist you in submitting your claim and in responding to your insurer’s following claim investigation, to have the best chance of getting your claim covered.
“Until I know this sure uncertainty, I’ll entertain the offered fallacy.”
Here, Shakespeare wrote about someone playing along with a falsehood before enough information was available to discern the truth. Your insurer’s initial response to your claim could put you in a similar situation. When you turn a lawsuit over to your insurance company, one of three things will happen: your insurance company will either (1) agree to defend you and hire you a lawyer, (2) agree to initially defend you, but under a reservation of rights to later deny coverage, or (3) deny any coverage for the claim and abandon you to defend yourself.
While the law varies from state to state, generally speaking, your insurer owes you several duties when it receives your claim, including a duty to investigate the claim, a duty to provide you a defense for claims that might be covered under your insurance policy, a duty to pay covered claims, and a duty to settle claims within policy limits where possible and reasonable. Insurance companies often hedge their risk by initially providing a defense, but under a reservation of rights to later deny coverage. This typically arrives in a letter informing you that XYZ law firm has been assigned to defend you, followed by numerous pages quoting policy language that your insurer claims may allow it to later deny coverage and not pay any judgment entered against you. A reservation of rights letter may even reserve a right for your insurer to later recover all money spent on your defense.
If you receive a reservation of rights letter, you may be entitled—again, depending on your state’s laws—to hire your own personal attorney who will represent your interests alone, and who will be independent of the lawyer assigned to you by your insurance company. State law may even require your insurance company to pay for this independent counsel.
If you didn’t consult independent counsel before submitting your claim or when your insurer was investigating it, you certainly should if you receive either a reservation of rights letter or an outright denial of coverage, as there is likely an opportunity to challenge your insurer’s coverage position from the very beginning of your case. As one example of the options available to you, your state’s laws may allow you, or the plaintiff who is suing you, to directly sue your insurance company in the same lawsuit and have the judge decide whether the claim is covered. The potential advantages of adding your insurer to the same lawsuit are obvious: the local judge handling your case may be more sympathetic to you, as a local contractor, than your big, out-of-state insurance company.
An experienced insurance coverage lawyer, who also knows your business, will be armed with legal arguments to challenge your insurance company’s adverse coverage position. In recent successful cases, our law firm has utilized numerous creative legal theories to defeat insurers’ initial denials of coverage and force insurers to resolve claims with insurance proceeds. For example, the following excerpt from a legal brief we recently filed lists 13 different legal arguments we utilized to challenge the various exclusions raised by our client’s insurer: Estopple/-waiver, unconscionability, illusory converage, Miller Doctrine, Hancock materiality, inapplicable exclusions, public policy, misrepresentation, unclear agency relationship, agent misconduct, lack of assent, negligent advice and post-claim underwriting.
“The miserable have no other medicine but only hope.”
To conclude the tortured Shakespeare references, the above list of potential legal challenges to an insurance claim denial should give you hope that, even in the miserable position of having an insurance claim denied, your trusted lawyer, who also knows insurance coverage, may be able to fight through your policy’s numerous exclusions, get your defense paid for, and resolve your claim with insurance money. Good luck, and, until next time, “Good night, good night! Parting is such sweet sorrow.”
David Humphreys, Esq., is an experienced litigator and business attorney with over 25 years’ experience helping clients resolve complex disputes, negotiate contracts, clear administrative hurdles, and more. David’s experience includes representing construction industry clients and developers in construction defect litigation, insurance coverage disputes, bond and lien claims, and breach of contract matters. In addition to his law practice, David is a frequent speaker at construction industry national meetings on topics including insurance coverage, contracting, construction defect litigation, and risk management. David’s law firm, Carson Law Group, PLLC, is based in Jackson, Mississippi, and represents clients throughout the Southeastern United States. This article first appeared in the June 2025 issue of the Foundation of the American Subcontractor’s Association’s publication The Contractor’s Compass.
