Case studies

A Client brought in ICA to market its risk management and insurance program. By tailoring specifications to suit their needs, carefully selecting brokers and insurance companies specializing in this hard to place products liability industry, ICA managed to nearly cut the total risk management budget in half. The Company had for years relied on one broker to handle the entire program, assuming they were obtaining a fair deal and good coverage. Once ICA reviewed the programs and pointed out numerous policy flaws, areas of improvement, what rates were being charged to competing companies in their industry this Client realized it had been overpaying for years – for inferior coverage! As the Client pointed out to ICA after successfully cutting their costs, “you shop around for cars, for appliances, for everything else in life, we never realized we should be shopping around for our insurance coverage!”

A large commercial real estate owner had been using the same lease language for decades, and had merely asked its real estate attorney to update the language as each lease came due. The attorney rightly updated the indemnification clauses, yet did not have the appropriate knowledge of insurance lingo to adequately update the insurance requirements. Following 9/11, when this landlord attempted to demand that its tenants provide proof that they carried appropriate Terrorism Coverage, the tenants relied on the antiquated language of their lease to state that there was no requirement that they provide terrorism coverage. The lease required “all risks property insurance at least as broad as Extended Coverage Endorsement #4″. This term went out of popular use in the early 1970’s yet the reference to it in the leases remained through the terrorism events of 2001.

ICA conducted research through its historical policy library and found that in the 1970’s, the War Exclusion did include exclusions for terrorism or sabotage. ICA went back to the intention of the policy drafters insuring All Risks Coverage to establish that terrorism should be covered as part of that coverage, as it was not specifically excluded, thus proving that per the terms of the lease, the tenants must provide terrorism insurance going forward at their own cost and expense. Since the losses of September 11 th were covered by those insuring buildings near Ground Zero, Thus, if a tenant had “All Risks” Coverage prior to 9/11, then they had terrorism insurance per the terms of its lease and must continue to maintain it. ICA also assisted the Client and its counsel in re-drafting the insurance language of the lease to add a clause that the tenants must maintain certain specific insurance types and limits as well as requiring that they “maintain any additional insurance as the Landlord deems reasonable” to prevent any such conflicts in the future.

This new Client had been sued in a products liability action for an allegedly faulty product. As the Client was in the process of facing reorganization, it had submitted the claim to its insurance company but insisted on utilizing its own bankruptcy attorney for handling. This attorney, with no products liability litigation experience to speak of, so muddled the handling of the products case that the insurer was offering only $450,000 in full and final settlement. ICA re-analyzed the policy wording, saw unaddressed, additional coverage areas that were being overlooked, then forced a revisit of the settlement offer with this new information, resulting in a settlement of $1,980,000, just two months after it was engaged!! ICA uncovered clauses in the policy providing remediation cost coverage, where the insurer was responsible for remediating additional product losses by covering the costs of replacing all allegedly faulty products, not just covering damages for the one party actually suing them. Of course, the bankruptcy attorney never caught that potential area of coverage.

The insurer had recognized that it was working with an amateur at first, who was seeking only the obvious coverage for the claim, yet when the experts stepped in, they were forced to offer up the coverage they knew was there but was not being asked for. In essence, ICA found language to maximize the amount recoverable by the Client, and by enforcing the remediation coverage, was able to prevent other potential similar lawsuits from ever occurring.

After the passage of the Sarbanes-Oxley Act, this Client, knew that it had to address all the new reporting issues required by the Act. Their accountants were quite helpful from the accounting perspective, yet the Client had little understanding as to how the Act would interact with their Directors and Officers Liability Policy. ICA, who had carefully analyzed how the new legislation affects the D&O exposure, was asked to help the Client sort through what they needed to address with the D&O underwriters with respect to their current policy and to prepare them for their next renewal. ICA pointed out areas of coverage specifically affected by the Act, including the D&O Policy’s “awareness”, “knowledge”, and “severability” limitations, as well as the “personal conduct” exclusions. These insurance clauses can limit the protection that a Director or Officer can expect from a D&O Policy, particularly in light of the many malfeasances which are imputed to a Corporate Executive under the Act. ICA helped guide the Client through revisions and synchronization of their Corporate Indemnification Agreements and their By-Laws to their D&O Policy. By doing so, the potential for recovery under the D&O policy for actions brought against Board Members and Corporate Executives was maximized.
Once again, ICA assured that this Client dotted their “i’s” and crossed their “t’s” properly with regard to D&O and the Sarbanes-Oxley Act. Before ICA’s involvement, the Client was planning on leaving the D&O Policy alone, despite the passage of the Act. ICA advised that if they had not addressed these corporate documents and if the Client had faced a claim against their Directors or Officers, the chances for complete indemnification and coverage would have been much slimmer.” See our Risk Assessment Service for Directors & Officers.