Claim Cost Containment

Business Issue

A McGriff client and several of their officers and directors were sued in a shareholder derivative action. The suit claimed decisions were made that negatively impacted the shareholders. Accepting the claim, the carrier reached a settlement with all parties. Part of the settlement required our client to pay the shareholders’ attorney fees in the amount of $387,500. They expected their insurance carrier to pay that expense and were quite concerned when the carrier said the plaintiff's counsel fees were not covered. The McGriff client contacted a claim consultant to assist.

Action Plan

After reviewing the coverage opinion and policy, the claim consultant developed a retort letter to the carrier. It pointed out:

• Case law which showed that courts have previously viewed plaintiff's counsel fees as a loss under a policy
• The policy did not restrict the carrier’s requirement to pay any expenses the insured was legally required to pay
• Even though the carrier cited the "American Rule”, which dictates that each party cover their own legal fees, that rule actually does not apply when dealing with the expectations of a contract, or the insurance policy, in this case.