Draft it better.
At the end of the day (that is, the day recently on which a court issued a ruling in which it conceded there were “significant financial consequences), a judicial determination concluded that multiple insurance companies simply didn’t go a good enough job in clearly articulating policy language to support their position that they were under no legal duty to defend an insured party.
As a result, they lost.
The outcome: They are now tasked to pay telecommunications provider Verizon Communications Inc. more than $48 million to help defray the costs that company incurred in litigating with other parties in connection with a company spinoff.
The case details are not overly complex and can be quickly summarized.
To wit: Verizon spun off a corporate subsidiary some years back, and purchased both primary and so-called “excess coverage” insurance from several insurers to cover any potential downsides flowing from the spinoff.
That was a wise decision. The newly created entity failed and declared bankruptcy, with various parties suing Verizon for losses suffered through their involvement with the spinoff.
Verizon prevailed in most of the litigation, but spent scores of millions defending against the claims. It sought payment from its insurers under the terms of its executed policies with them.
They argued that no duty repayment duty existed, given that Verizon’s woes did not stem from any securities-related claims, which they stated were the only types of matters covered under the policies.
The court disagreed, stating that policy language addressing limitations was murky and inconsistent with policy terms and that imposing limitations on Verizon’s ability to recover would be unfair.
The case is instructive in Colorado and elsewhere across the country on several fronts, especially for its underscoring of the point regarding the sheer importance of clear and consistent language informing a policy at every material point.
The court noted in the Verizon case that the insurers were seemingly more fixated on touting their specialized coverage and gaining a competitive market edge than on following a “common sense, plain language approach to clearly articulating what was covered.”
And for that reason, the court noted, they lost.
Timely drafting assistance from a proven insurance defense lawyer might have resulted in a different outcome.