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Insurance Can Save Your Business If Purchased Wisely

By Christopher H. Yetka and James W. Reuter
Lindquist & Vennum P.L.L.P. Insurance Practice Group

The September 11 attacks in New York, Washington, D.C., and Pennsylvania brought to light in a grim way the importance of insurance coverage. A headline read, “Damage Will Likely Cost Insurers a Record Sum.” What was not mentioned were the costs that will be borne by businesses that failed to take the time to procure the appropriate coverage prior to the tragedy.

As a business, it is important to ensure that the burden for large losses, however they may occur, is shifted to insurers whenever economically feasible. Furthermore, it is important to understand the risks your business faces, and to assure that the policies you have in place fully cover those risks.

It is not possible in this short article to list all of the different types of insurance products available or the differences among these products. However, when your company is shopping for insurance, or when policies are up for renewal, here are some important questions to address:

(1) What are the principal risks being insured? Is it business interruption, property damage due to fire or flood, employee claims for harassment or unlawful discharge, director and officer liability? The list can grow quickly. You must be sure the policies you have cover the risks identified.

(2) Do your insurance policies fully cover the risk? Are your coverage limits high enough? What are the deductibles? Will losses at separate facilities or at separate times be considered a single loss or multiple losses for purposes of the coverage limits and deductibles? Are there exclusions that preclude coverage? Is the policy an occurrence policy or a claims made policy? If a claim is made, is there a retroactive date? Do the costs of defending a claim, if borne by the insurer, reduce the total limits available to cover claims?

(3) If there are gaps in coverage, can they be filled? Different insurance companies use different language in their policies. A recent review of several director and officer liability policies for a client found that coverage for negligent misstatements related to the sale of shares in a cooperative was expressly excluded in some policies and not in others. Many insurers are willing to negotiate endorsements to their policies that broaden coverage, usually for an increased premium. The trick is to recognize there is a deficiency and ask for the extended coverage.

(4) Will the policy be handy when a claim comes in? Every company should establish a means of keeping insurance policies forever. The increase of pollution claims has given rise to a cottage industry in reconstructing insurance policies, often going back decades, where businesses have failed to keep copies of their policies.

Purchasing insurance is complex and not to be taken lightly. Take the time to carefully review your company’s coverage requirements. Seek the guidance of experienced professionals. Working with a knowledgeable insurance broker and seasoned insurance counsel will go a long way to preparing your company for any contingency, even one as unforeseen and seemingly improbable as September 11. 

ABOUT THE AUTHORS

Christopher H. Yetka is a trial attorney practicing in Lindquist & Vennum’s Insurance Practice Group. Mr. Yetka has more than eight years’ experience helping corporations and individuals obtain insurance and recover under insurance policies. He can be contacted by e-mail at cyetka@lindquist.com.

James W. Reuter is chair of Lindquist & Vennum’s Insurance Practice Group. For more than 25 years, he has represented businesses and individuals in insurance matters, including disputes with insurance companies. Mr. Reuter can be contacted at jreuter@lindquist.com.

riskVue | The webzine for risk management professionals
April 2002