Bullet-Proof Insurance Coverage Opinions – Part II

Choices of a businessman

In Part I of this post we looked at the beginnings of a good coverage opinion – clear identification of the issues, and a comprehensive matrix of facts upon which the coverage opinion is based.  In Part II, we examine the remaining building blocks of a bullet-proof coverage opinion.

 Include The Policy Provisions At Issue

In order to launch into the meat of the coverage opinion, the applicable provisions of the policy should be included in the coverage opinion.  I prefer to actually “snapshot” .pdf cuts of the actual policy terms into the body of the opinion so that the reader sees not just the provision, but how it appears in the policy.  This is by no means mandatory, but verbatim inclusion of the policy provisions at issue is, however.

The opinion writer should take care to not only produce coverage terms, but applicable exclusions, and exceptions to the exclusions, so that all of the tools are in full view of the reader.

Analysis and Discussion of Applicable Law

There is nothing totally new under the sun, which means more likely than not the policy provision on which outside counsel is providing opinion has been interpreted in prior opinions.  These prior rulings provide the important, and in some cases binding, context in which the applicable policy terms will be viewed.

Any judicial guidance of the same or similar coverage issues  is useful, but the best guidance comes in the form of cases with similar factual backgrounds (yet another reason for a comprehensive discussion of the known facts near the top of the coverage opinion).   While the opinion writer needn’t necessarily provide an answer to the coverage question in this phase of the opinion,  good analysis of applicable law may start to orient and point the reader in the direction the opinion is going to read.  As we said, there is nothing really new under the sun.

While jurisdictional case law is obviously ideal, outside counsel should also include opinions from other jurisdictions which bear factual similarity to the coverage analysis  being undertaken.

Tying It Together: Legal Analysis and Opinion

With the groundwork laid, outside counsel can now gather all of the materials she has collected in the opinion, and provide a logical analysis of the coverage question presented to outside counsel by the client.  The conclusion of the opinion letter should be the culmination of the facts, the policy provisions implicated, and the applicable law.

This is not the time for surprise endings:  a good coverage opinion will logically flow to the conclusions drawn.  Conclusions which are incongruent with anything that has come before, whether it be the facts, the policy provisions, or the law, is a sign that something is amiss, either with the predicates to the conclusion, or the conclusion itself.  It is not the kind of disconnect a client is looking for, so during the draft phase, the inconsistencies must be reconciled for the opinion to be reliable.

Going The Extra Mile:  Providing for Contingencies

The best outside coverage lawyers anticipate the needs of their clients.  They also recognize, in cases where investigation is ongoing, that further developments might impact the opinion.  Such possibilities should be included in the coverage opinion, so that the client knows how the validity of the opinion could be impacted by newly developed facts.  It is also a good reminder to the legal department requesting the opinion that the process is a fluid one, and an updated opinion might be the best course after new, significant information is learned.

Insurance company legal departments want solid coverage opinions which will withstand scrutiny of not just themselves, but others should that become necessary down the road.  For that reason, a comprehensive statement of facts, of the applicable policy, and of the relevant law should be provided.  The analysis of coverage and conclusion should flow from these elements, and the client should be notified that there may be contingencies in an ongoing investigation which could impact the opinion, requiring supplementation.

 

Bullet-Proof Insurance Coverage Opinions, Part I

choices-Fotolia_43362319_XS.jpg

In this post, we begin a brief look at the building blocks of a bullet-proof legal opinion on an insurance coverage issue.  Legal departments should look for these elements and insist on them in written coverage opinions from outside counsel, and outside counsel should make sure to use these elements as touchstones, in order to provide the most reliable coverage opinion possible.

Identify and Clarify The Precise Coverage Issue(s) Examined

Clarity and precision are required up front — if they are not, the entire opinion will falter and fail to provide what the client is asking for.  This seems obvious, but I am continually surprised by how often I get the question (or at least of piece of it)  wrong during the first phone call from general counsel or a claims executive.  It should be mandatory for outside counsel to state verbally or in a preliminary note to the client what she believes the coverage issue to be.  Why?  Because it is the first and best chance the client will get to make sure it is going to get what it believes it is asking for.  And it is the first and best chance to clear the legal opinion of any  confusion, mistake, and misunderstanding.

Another reason for this exercise is to identify sub-issues, or follow-on coverage issues which may present themselves.  If the client wants an opinion on Exclusion A, might it also want opinion on Exclusion D, as well as the exceptions to exclusions A and D?  Should it want one?   Not only does this ensure that the client gets an opinion on what it wants, it ensures the client gets an opinion which serves the purposes behind it:  advice and protection.   A partial coverage opinion which ignores related issues is likely to be criticized as myopic or artificially crafted in favor of insurer.    A complete coverage opinion, on the other hand,  covering all related issues, is much less assailable down the road.

Once the issues are clarified and refined, they should be stated at or near the outset of the written coverage opinion.

Identify  and Lay Down the Factual Matrix of the Coverage Opinion

A good legal opinion contains a thorough recitation of all known, relevant  facts germane to the coverage determination.  The written opinion should also advise the insurer that if there are additional facts the legal department would like outside counsel to consider, those facts should be provided to counsel and a supplemental opinion offered.   While this serves to protect outside counsel in the proffering of an opinion, it also ensures again that the client gets precisely what it wants from outside counsel.  It provides the legal department seeking the opinion to make sure that all of the facts it wants considered  to be taken into account, and ensures that mistakes can be fixed before the coverage opinion is provided.

All key facts should be stated in the written coverage opinion.  This also implies that facts which are peripheral, irrelevant, and unnecessary to the coverage determination need not be continued.  Heft does not equal value, and no in-house general counsel is going to appreciate you providing a 20-page  coverage opinion when 8  would have done the job just as well.  The coverage  opinion will only be as good as the foundation of facts upon which it is based, and set down in the opinion itself.

In Part II of Bullet-Proof Coverage Opinions, we will take up the importance of inclusion of the applicable policy terms and conditions at issue, analysis and discussion of applicable legal precedent interpreting those provisions, thoughtful legal analysis, and providing for contingencies in the opinion.