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Liability Coverage: Frequently Asked Questions

When an insurance company fails to defend or indemnify a company or its other insureds (e.g., affiliates, directors, officers, employees) against liability claims, many questions follow. Below are some of the frequently asked questions encountered by The Law Offices of Orin H. Lewis, PLLC. It is important to keep in mind that these situations are complicated and every situation is different. For answers to questions regarding your specific case, schedule a consultation by calling attorney Orin H. Lewis at 713 423 6772.

Can an insurance company be sued for a failure to defend? Yes. An insurance company does not get the final word when it fails to defend a policyholder or its insureds. If an insurance company has refused to defend you, it is possible, even before the underlying lawsuit is concluded, to seek redress and either get a defense or reimbursement of your defense costs by filing a lawsuit against your insurance company.

What happens if an insurance company fails to reasonably settle a claim within policy limits? The law recognizes the financial harm that can happen when an insurance company fails to accept a reasonable settlement demand. The Stowers doctrine may make the insurance company liable to a policyholder or other insured for a judgment or settlement, including amounts that exceed the limits of the policy, if the insurance company previously rejected a reasonable demand from the underlying plaintiff to settle a covered claim that was within policy limits.  Don’t wait until a judgment or settlement in excess of policy limits has occurred to get informed regarding your rights though.  When a settlement within policy limits has been made, engage an insurance coverage attorney to give you advice regarding your risks or any options you may have or actions you may want to take under the circumstances.

When should an insured seek counsel regarding an insurance company’s duty to defend? After notice of a claim has been tendered, an insurance company should promptly either deny the defense, undertake the defense without a reservation of rights, or undertake the defense subject to a reservation of rights.  No reason exists why in most circumstances an insurance company cannot inform the insured of its position before an answer or other responsive pleading is due.  Until the defense is undertaken, the insured should take whatever steps are necessary to defend, itself, until such time as the insurer either accepts or rejects its duty to defend.  This may include seeking an extension from opposing counsel in the underlying lawsuit of the date an answer or other responsive pleading is due or filing an answer or other responsive pleading if such an extension cannot be obtained.  If a decision by the insurance company does not promptly follow, if a defense is denied, if a defense is tendered subject to a reservation of rights, or if an insurance company seeks to reserve its rights after assuming a defense without a reservation of rights, the insured should immediately contact an insurance coverage attorney to seek advice regarding how to secure and protect its rights under the circumstances.

Contact an Experienced Lawyer With Answers to Your Questions

To learn more about liability coverage and your rights as a policyholder or other insured, contact The Law Offices of Orin H. Lewis, PLLC. Call 713 423 6772 or complete the online contact form to schedule an initial consultation. Located in Houston, the firm provides representation for companies and their insureds across Texas and throughout the United States.