Navigating the Insurance Claims Handling Process:
A Practical View With a Focus on D&O Insurance
Presented by:
Donald W. Kiel, K&L Gates
Anthony P. La Rocco, K&L Gates
Commercial Insurance a Key Corporate Asset

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Difference between potentially overwhelming
liabilities or losses, and survival or material impact
to corporate profitability
When a claim is asserted or a loss occurs,
important for corporate counsel to be able to:
1. Navigate through the minefields of the claim
process
2. Know when to negotiate and when to sue
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Additional complications in the D&O context
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Program Organization
1. A Short Primer on D&O Insurance
2. Evaluating the Claim for Coverage
3. The Claims Process
4. Claims Disputes
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I.A Short Primer on D&O Insurance
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A Short Primer on D&O Insurance
 Typically written on claims first made and reported basis
 Primary purpose to protect individual directors, officers, and
certain other individuals for claims arising out of “wrongful
acts”
 Typical policy of public company insures company only for
securities claims, and indemnification of Ds and Os
 Typical policy of private company insures company for claims
arising out of “wrongful acts,” with many exclusions, and for
indemnification of Ds and Os
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A Short Primer on D&O Insurance (cont’d)
 Many of the very wrongful acts that trigger the
policy may also trigger application of an exclusion
 Intersection of broad definition of “Claim” and strict
notice requirements often leads to coverage
disputes
 Some companies combine D&O with EPLI
insurance
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II. Evaluating the Claim for Coverage
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Evaluating the Claim for Coverage
 Need to promptly evaluate to identify proper policies to be
noticed
 Non-D&O claim
 Multiple types of policies
 e.g., employment claim, including personal injury allegations
 Multiple years of policies
 e.g., long-term exposure claims
 Multiple layers of coverage
 e.g., large claim that could exceed primary policy limits
 Multiple coverage lines
 e.g., policies that covered corporate predecessors
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Evaluating the Claim for Coverage (cont’d)
 D&O Claim
 Multiple policies
 e.g., side A only, independent directors only
 Multiple layers
 e.g., large claim that could exceed primary policy limit
 Correct year
 e.g., making sure you notify the correct policy in a timely
manner
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Evaluating the Claim for Coverage
 Need to determine whether proceeding or other
assertion of liability or potential liability is a “Claim”
 “Claim” defined in Policy
 Typically includes:
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Civil and criminal lawsuits
Written assertions of liability
Certain administrative proceedings
Formal investigations
Target letters
 Failure to give notice of minor “Claim” could prejudice
coverage for serious “Claim” arising thereafter
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Evaluating the Claim for Coverage (cont’d)
 Failure to notice correct policies on timely basis
could prejudice coverage
 Better to err on the side of “over notice”
 Consult your professionals
 Broker
 Risk manager
 Counsel
 Make sure you have thorough understanding of
your company’s insurance program
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III.
The Claims Process
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How is a Claim Presented
 Through Agent or Broker, or Directly to Carrier?
 Look to Notice Provision for Recipient
 Some policies (and particularly D&O policies) provide
specific address or agent for notice
 If given orally, follow-up in writing
 Policy may require certain information to be
provided with notice
 D&O policies usually only the Claim – copy of suit or
claim papers
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How is Claim Presented (cont’d)
 Other policies (e.g., GL) require notice of both
occurrence and claim
 Occurrence – how, when and where; names of injured
persons & witnesses; nature & location of injury or damage
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Notice
 Timely notice to the insurer (not the TPA)
 Notice obligations differ depending on type of policy
 Occurrence policy – notice of occurrence and notice
of claim as soon as practicable
 Claims made policy – notice of claim as soon as
practicable and usually within same policy period
when claim made
 Extended reporting period provisions for claims made at end
of policy period
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Notice (cont’d)
 Who within the company needs to know about the
occurrence or claim to trigger the notice obligation?
 Best Practice: endorsement specifying corporate
officers or risk manager can offer special protection
 Timing – “as soon as practicable”
 For occurrence policies:
 Prejudice standard in NJ/PA; no prejudice standard in NY
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Notice (cont’d)
 For claims made policies, including D&O, notice
within the policy period is required to trigger the
policy, and notice after the policy period is likely to
be a valid defense to coverage, regardless of
prejudice
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Notice (cont’d)
 Notice of Circumstances v. Notice of Claim (claims
made policies only)
 What constitutes a claim?
 Usually defined in the policy to include lawsuits, written
demands; arbitration demands; certain types of
administrative proceedings; formal investigations
 What constitutes a circumstance?
 Usually a circumstance reasonably expected to give rise to a
claim
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Notice (cont’d)
 Notice of circumstances during the policy period can
protect you from a future claim that might be
excluded under a later policy
 If a claim is later made, handled under policy under
which notice of circumstances given
 Intersection with policy renewal application
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Notice (cont’d)
 Notice of circumstance information requirements
 Wrongful act allegation anticipated
 Reasons for anticipating claim
 Details – dates, persons, entities involved
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The Course of a Claim
1. Written notice to the insurer
2. Assigned to adjuster or claims handler

Insurers increasingly assigning D&O claims to
counsel
3. Investigation
4. Initial coverage determination
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Declination, Reservation of rights, Acknowledgment
5. Rarely a final coverage determination for D&O
claims until underlying claim concluded
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IV. Claims Disputes
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Most Common D&O Claims Disputes
 Was the Claim “first made” before or during the
policy period?
 Is the proceeding or assertion against the insured a
“Claim” under the policy?
 Does there need to be an allocation of defense and
indemnity payments between covered and noncovered claims?
 Does the insurer contend that the basis for the
Claim also gives the insurer the right or ability to
void the policy ab initio for fraud in the application?
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Most Common D&O Claims Disputes
 Does the Claim trigger application of fraud
exclusion?
 Does the Claim trigger application of improperly
obtained remuneration exclusion?
 If the Claim seeks disgorgement of profits or illgotten funds, does common law preclude recovery
of insurance indemnity?
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Statute of Limitations
 At what point to pull the trigger and sue the carrier?
 In the liability policy context, general contract
statute applies (6 years in New Jersey)
 At what point does the 6 years begin to run?
 When carrier denies coverage?
 When occurrence happens?
 When claim is made?
 In New Jersey, the rule is that it begins when the
carrier denies coverage
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Statute of Limitations
 Some courts have ruled that the statute of
limitations is “tolled” during the time between when
the claim is made and the carrier responds
 Best practice: negotiate a tolling agreement where
the statute of limitations is tolled for a specified
amount of time
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Venue Considerations
1. Choice of law rules
2. Substantive coverage law
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All else being equal, New Jersey tends to be a
policyholder-friendly jurisdiction
3. Recovery of counsel fees in coverage litigation
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New Jersey court rules specifically permit award of
counsel fees to successful policyholder in coverage
litigation on liability or indemnity policies
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Venue Considerations (cont’d)
Answers to these questions may impact
the timing of your suit against the carrier
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