This is also a checklist for claimant’s attorney as to what to look for in the insurer’s files.
Ideally for the insurance company, if there is a coverage dispute with the insured, there are four separate files:
1. The file of the writing agent,
2. The underwriting file on the insured,
3. The (liability) claim file regarding the liability claim against the insured and the defense of the insured, and
4. The (coverage) claim file regarding the dispute between the insurer and the insured on coverage.
After a coverage dispute emerges – do not put in the liability claim file [file (3) above]: anything that goes in files (1), (2) or (4) above. Examples are:
a. The insurer’s personnel’s conclusions on coverage
b. Correspondence and documents to/from the insurer about coverage
c. Internal documents about coverage
If there is a coverage dispute – do not put in the liability claim file:
a. Your personal observations about the insured or the claimant except those that discuss how the jury will regard the insured or the claimant on the underlying claim.
b. Underwriting manuals or coverage materials or claims procedural manuals.
c. Anything that does not relate to what can be shown in court in defending the insured, or to what the claimant can prove against your insured.
Remember if your company is sued for bad faith, you will need to freeze the above numbered four files. They will be the evidence used to defend or attack the company. Start new file folders for items received, created, or sent after the date the bad faith lawsuit was served on your company.