Curmudgeon on insurance coverage litigation

My learned opponent was showering me with praise that was both effusive and insincere. "Mr. Curmudgeon," he intoned, "has invented an extraordinary position in this case. According to his reading of the policy, he must prevail: Heads he wins, tails I lose."

"Well, of course," I wanted to shout -- but didn't -- after over 30 years of courtroom experience, I am somewhat able to control my outbursts -- "if it were otherwise, I wouldn't have filed the case."

Let me explain: Insurance is a way to spread risk. There are four basic kinds of insurance.

Property insurance protects us against some things we cannot control -- risks like fire, tornado, or a car careening off the road and into our living room. Without insurance, a house fire might bankrupt a family. But, thanks to insurance, where every policyholder pays a little against the prospect that this bad thing might happen to them, a house fire is merely a horrible ordeal -- but one from which a family can recover. Things can be replaced.

Property insurance covers things that can happen, not things that must. Things that must happen -- entropy increases -- are not covered. The roof on your home will eventually wear out -- and loss caused by ordinary wear and tear is not covered.

Of course, property insurance does not cover everything that can happen. Flood, typically, is not covered by your homeowners insurance. The risk of flood is too great in some areas; in those areas -- flood plains -- the government sells a separate policy. Which (if you live in such an area) you really should have. Earthquake also is not typically covered. Insurance companies want to survive even if the Big One hits California.

The second and third types of what we call "insurance" aren't really insurance at all. If you think of insurance as something that protects you against what might happen, as opposed to what must happen, life and health insurance make no sense at all. Everybody dies; the risk addressed by life insurance is really the risk of dying young -- because not everybody does that. If you live a long and full life you've more than paid for any life insurance your heirs collect.

Health insurance is more or less a scam. The risk of catastrophic illness is insurable, because not everyone will face catastrophic illness in their lifetime (it just seems that way). However, "wellness care" or annual checkups or any of a dozen gimcracks and geegaws larded onto the typical health "plan," some by statute, have nothing to do with any arguable concept of shared risk; they're just ways of getting someone else to pay for stuff you'd otherwise pay on your own. And you know the really important flaw in this? If you don't have to pay for it, and you get it anyway, you probably don't really care what it costs, do you? Here is the source of our ever-rising health care costs.

The fourth type of insurance is liability insurance. Liability insurance policyholders get someone else to pay for their mistakes. It was always worthwhile to sue if you got rear-ended by a Rolls-Royce; mandatory insurance laws may make it worthwhile to sue even if you were hit instead by a used Yugo. May.

The basic struggle in liability insurance is between negligent and intentional conduct: Mistakes happen (there are earthier ways to express this) -- but sometimes someone does something accidentally... on purpose.

If I were to whack you upside the head with a pool cue and knock out a few of your teeth, you might have me arrested for battery. But that wouldn't pay your dentist. You might sue me for battery -- an intentional tort -- but I may be without assets to compensate you. So, instead, you sue me for negligently swinging my pool cue around the barroom without first ascertaining whether your head was in the way. Now -- perhaps -- my liability insurance will pay your dental bills.

You can see the problem: Without easy access to liability insurance proceeds, all sorts of folks injured by the wrongful conduct of others will be forced to wholly bear the costs of the others' harm. The slogan of toddlers and teenagers everywhere -- it's not fair! -- is also a powerful mantra in the law.

Insurers tweak their policies continuously looking to limit their exposure to truly accidental occurrences; judges look at insuring agreements and exclusions with a jaundiced eye, looking to penetrate those verbal defenses wherever arguably possible to achieve a fair result (fair often being defined to mean that the insurance company has the only money and can afford to pay).

An insurance coverage attorney, then -- me, for example -- has to be aware of this fact of life and to always, always, always urge the insurer to caution about asserting a potential policy defense. It might be different in environmental coverage cases, where it might make sense to risk hundreds of thousands of dollars in legal fees against the possibility of avoiding millions, or tens of millions in exposure -- but in normal homeowner or CGL policy situations, the cost of asserting a defense is frequently -- often -- maybe even usually -- outweighed by the risk of failure. By the risk of a judge deciding not to read the policy as written or apply the exclusion because... well, just because.

Small wonder, then, that, in coverage litigation, when an insurer decides, after careful consideration, to pursue a defense that there would be more than one path to victory for an insurer. The policies are designed to dovetail, to interlock; if a judge opens one door, he or she may very well have closed a window.

Such was my case yesterday.

We'll see what the judge thinks. He was reviewing a case transferred to him from another judge. I'd made a different argument to that judge and she, in ruling against me, in being "fair," had made some findings which (in my opinion) necessitate the application of a different policy defense. The court was initially not too sure about this... but who knows?

The funny thing is, if you sit in the Daley Center courtrooms as often as I do, you'll see that insurers do win coverage cases. All the time. Every judge seems to understand -- as I've explained to you this morning -- that no prudent insurer brings a coverage case unless it is certain sure of its rights. Every judge in the Daley Center seems to understand this, alas, except the ones I appear before....

Sometimes it just gets to me.

Sometimes I just want to scream....

It's not fair!