premium payments and issuing petty cash checks
to herself. The policy provided $10,000 in coverage per occurrence (defined as loss involving “a
single act or series of related acts”), subject only to
a $250 deductible. Because most of the individual
acts of embezzlement well exceeded the deductible, American Commerce argued that each act of
embezzlement was a separate occurrence, resulting in 155 occurrences (or up to $1.55 million in
coverage above the deductibles). Trying to limit its
upper extent of exposure, the insurance company
argued that the embezzlement constituted two
“series of related acts” under the policy, resulting
in only $20,000 in coverage for the entire claim.
The Minnesota Supreme Court declined to adopt
the policyholder’s argument on the number of occurrences — because it saw the likelihood of that
argument being misused by insurance companies
where most or all individual instances of wrongdoing fall beneath the deductible or SIR. “Thus, while
adopting American Commerce’s expedient definition of occurrence would benefit American Commerce in this case, it might well have a deleterious
effect on the insurance industry as a whole. Future
policyholders would be harmed if, as often occurs
in cases of petty employee theft, embezzlers steal in
amounts below the deductible.” Id. at 229-30.
Without a Scratch
First, before taking a position as to whether a series
of claims triggers multiple SIRs, with or without
multiple policy limits, check the applicable case law
to see which approach to SIR a state’s aggregation
courts have adopted. Courts sometimes decide on
the outcome that generates the most coverage for
the policyholder, and reason backwards in order to
hold insurance companies to their duty to deliver
the coverage its customer reasonably expected.
Other courts apply a different analysis when deciding a multiple SIR issue than they employ when
deciding a multiple limits issue. Knowing ahead
of time the inclination of the courts that will hear
the dispute will help plan the manner in which the
claim is presented to the insurance company. Experienced insurance recovery counsel can provide
valuable guidance in this process.
Second, where possible, leverage the policyholder’s
relationship with the insurance company, and more
importantly, the broker’s relationship with the
10 Enforce: The Insurance Policy Enforcement Journal
insurance company, to create a bigger downside
for the insurance company if it takes an aggressive
stance. If properly incentivized, insurance companies sometimes decide claims based on business
rather than coverage considerations. The incentive
is the future revenue earned by keeping the insurance relationship in place. Here, having a broker
willing to risk a relationship with an underwriter to
get a claim paid is critically important.
Finally, never give up. Insurance companies sometimes take advantage of the policyholder that is
unaccustomed to litigating coverage issues and
simply wants the claim paid so it can get back to its
core business, by making a low-ball offer in hopes
that the policyholder has no stomach for a fight.
Insurance companies’ core business, at least on the
claims side, is limiting coverage where possible.
Level the playing field by bringing in capable insurance professionals (insurance recovery counse