AIC AIC Litigation & Legal Proceedings 2 — Questions and Answers
Question 1: What is the primary role of a coverage counsel in complex insurance litigation?
- To handle day-to-day claims adjusting
- To provide legal opinions on whether a policy covers a particular claim or loss (Correct answer)
- To negotiate salvage values
- To manage subcontractor relationships
Correct answer: To provide legal opinions on whether a policy covers a particular claim or loss
Coverage counsel analyzes policy language, endorsements, and applicable law to advise the insurer on whether coverage exists for a disputed claim.
Question 2: In litigation, what is the significance of the 'four corners rule' for an insurer's duty to defend?
- It limits discovery to four documents
- It requires the insurer to look only at the policy and the complaint to determine if a defense duty exists (Correct answer)
- It restricts settlements to four categories of damages
- It mandates four independent appraisals
Correct answer: It requires the insurer to look only at the policy and the complaint to determine if a defense duty exists
Under the four corners rule, the duty to defend is determined solely by comparing the allegations in the complaint against the policy's coverage terms.
Question 3: What is a 'declaratory judgment action' in insurance?
- A court order to pay a claim immediately
- A lawsuit filed to obtain a court ruling on whether a policy covers a particular claim (Correct answer)
- A settlement agreement approved by a judge
- A regulatory order requiring the insurer to pay
Correct answer: A lawsuit filed to obtain a court ruling on whether a policy covers a particular claim
A declaratory judgment action allows an insurer or insured to ask a court to interpret the policy and declare the rights and obligations of the parties.
Question 4: What does 'apportionment of fault' determine in a multi-defendant liability claim?
- How the claim is split between the insurer and reinsurer
- The percentage of liability assigned to each defendant contributing to a loss (Correct answer)
- The allocation of claim costs between coverage lines
- The split of legal fees among defense counsel
Correct answer: The percentage of liability assigned to each defendant contributing to a loss
Apportionment of fault assigns a percentage of responsibility to each party whose negligence contributed to the loss, affecting each defendant's financial exposure.
Question 5: What is a 'Stowers demand' in Texas insurance litigation?
- A formal appraisal request
- A settlement demand within policy limits that triggers the insurer's duty to accept or risk excess liability (Correct answer)
- A request for an Examination Under Oath
- A subrogation notice to a third party
Correct answer: A settlement demand within policy limits that triggers the insurer's duty to accept or risk excess liability
A Stowers demand requires the insurer to accept a settlement within policy limits when a reasonable insurer would do so, or face liability for any excess judgment.
Question 6: What is the purpose of an 'interpleader' action in an insurance claim?
- To compel the insured to submit to an EUO
- To allow the insurer to deposit policy proceeds with the court when multiple parties claim the same funds (Correct answer)
- To deny coverage due to late notice
- To accelerate the trial schedule
Correct answer: To allow the insurer to deposit policy proceeds with the court when multiple parties claim the same funds
Interpleader allows the insurer to avoid multiple liability by depositing disputed funds with the court and letting the competing claimants litigate their rights.
AIC AIC Litigation & Legal Proceedings 2
What is the primary role of a coverage counsel in complex insurance litigation?