Why Do Insurers Say That?

Q. Why would the insurance company restrict the insured’s ability to settle claims within the retention?

A. One reason is to protect the interests of the insured and insurer. If a settlement in one case could cause additional cases to be filed or make other cases more severe, a settlement may not be the best solution. Or it may be possible to structure a settlement to mitigate or avoid the detrimental effects. The insurer may want the right to get involved to help the insured make a decision that is beneficial to both parties, insured and insurer.

Q. Why would the insurance company extend the insured more leeway in choosing counsel in foreign jurisdictions?

A. In many instances, the insured does business in a foreign jurisdiction where the insurer does not. So, if the insured is more knowledgeable about the legal climate in that foreign jurisdiction and shows sound judgment, allowing the insured to take a more active role in defending the claim just makes sense.

Q. Why would the insurance company restrict the coverage territory to jurisdictions where the USA has not imposed trade sanctions?

A. It’s the law. For an insurer to do business in a nation where the U.S. government has prohibited the transaction of business, they would need to violate federal laws. Does it make a difference that some policies don’t refer to the effect of trade restrictions? No. All carriers would be bound by the law as a matter of public policy. Some insurers put insureds on notice of the restriction and others don’t.

Q. When considering innocent party coverage, why do some insurers say acts of certain employees are attributable to the insured company and other insurers don’t include such language?

A. There may not be any real difference in these two approaches. Consider what a corporation is. It’s a lifeless thing, a legal entity. A corporation can only act through its executive officers (and employees, directors, etc.). Plus, under the law, a corporation is generally responsible for what its employees do, as long as the actions are within the scope of the employee’s duties. So even if the policy doesn’t say acts by employees are attributable to the corporation, they probably are. An insurer would need to say in some way that acts of employees are not attributable to the company in order to change the normal operation of law.