7 Common Insurance Issues in Commercial Litigation

Commercial litigation will implicate one or both parties’ insurance coverage in many cases. In commercial litigation, a variety of insurance-related issues can arise, and knowing how to address them effectively can be critical to securing a favorable result. These include issues related to coverage limits, subrogation and indemnification, among others.

Commercial litigation and insurance coverage issues often go hand in hand. Not only will one or both parties typically have coverage that applies (or, at least, arguably applies) in some way; but, in many cases, the parties’ contract will include insurance-related provisions as well. As a result, when facing a commercial dispute, it is important to engage an experienced Miami commercial litigation attorney who is familiar with the insurance issues involved.

Important Insurance-Related Considerations in Commercial Disputes

What are some examples of these issues? Here are seven examples of insurance-related issues that have the potential to play a central role in commercial litigation:

1. Required Insurance Coverage (and Additional Insured Endorsements)

As with most aspects of commercial disputes, when dealing with questions of insurance coverage, the first step is to review the relevant terms of the parties’ contract. This includes any terms pertaining to required insurance coverage. It is common for commercial contracts to mandate insurance coverage (and for the non-insured party to be named as an “additional insured”), but the specific requirements—and whether the relevant party has complied with these requirements—will be key to determining what coverage is available.

2. Coverage Limits

In this same vein, the relevant coverage limits can play a key role. In many cases, knowing how much coverage is available will play a key role in both parties’ decision-making regarding settlement negotiations.

3. Waivers, Damages Caps and Other Liability-Related Provisions

While not directly related to insurance, provisions such as waivers, damages caps, and other liability-related provisions can come into play here as well. If a party has waived its right to pursue certain claims, or if a contractual damages cap limits a party’s potential recovery below the insurance coverage that is available, this should also factor into both parties’ decision-making processes.

4. Indemnification Obligations

Indemnification provisions shift liability between contracting parties, which means indemnification and insurance coverage often go hand in hand. Indemnification clauses can determine which party’s insurance coverage applies, and disputes involving indemnification liability may precede any discussions regarding coverage and settlement.

5. Subrogation Rights (and Waivers)

As a general rule, commercial insurers have subrogation rights related to any claims filed by their insureds. This means they have the right to pursue claims against any third parties legally responsible for insured losses. However, parties can (and often do) seek subrogation waivers during the commercial contracting process—and this can have a major impact on how insurers (and other parties) approach the litigation process in the event of a multi-party dispute.

Crucially, improperly waiving an insurer’s subrogation rights in a commercial contract can also lead to denial of coverage in some cases. As a result, if a party has improperly waived subrogation, this is a key fact that all parties need to know.

6. Primary vs. Secondary (or Excess) Coverage

Distinctions between primary and secondary (or excess) coverage can also play a critical role in determining ultimate liability in a commercial dispute. If an insurer is responsible for providing primary coverage, it is first in line to pay any settlement or damages awarded. If an insurer is responsible for providing “primary and noncontributory” coverage, the insurer cannot seek contribution from a secondary insurer; however, the parties involved in the dispute can still pursue secondary coverage once the applicable primary coverage has been exhausted.

7. Broad and Ambiguous Contract Language

Given the issues discussed above, assigning financial responsibility among all parties involved in a commercial dispute relies on clear and unambiguous contract language. If the language of a commercial contract or insurance policy is overly broad, excessively generalized, or ambiguous for other reasons, then coming to terms may be a necessary precursor to dealing with the underlying liability risk(s) at hand. In this scenario, litigation will often prove necessary, particularly when the amount at issue is substantial.

Again, while these are among the most common insurance-related issues in commercial disputes, this list is not exhaustive. By engaging an experienced Miami commercial litigation attorney early in the process, parties and their insurers can ensure they make informed decisions based on a clear, comprehensive understanding of all relevant insurance-related considerations.

FAQs: Dealing with Insurance Issues in Commercial Litigation

What if a party to a commercial contract has failed to maintain required insurance coverage or name the other party as an additional insured?

If a party to a commercial contract has not complied with its insurance-related obligations, this can play a major role in the event of a dispute. In this scenario, it will generally be too late for either party to obtain coverage, which means the liable party could face direct financial responsibility.

How do subrogation waivers work in commercial disputes?

Subrogation waivers in commercial contracts prevent an insured party’s insurer from seeking to recover damages for a covered loss. As a result, subrogation waivers can play a central role in the event of a dispute involving a covered claim, and if a party has improperly granted a subrogation waiver, this could result in a denial of coverage.

What if it isn’t clear which party’s insurance coverage applies?

If it isn’t clear which party’s insurance coverage applies in a commercial dispute, determining coverage may be a necessary first step toward securing a resolution. Whether due to ambiguous contract language or an insurer’s attempt to dispute coverage, this is not an uncommon scenario and a common source of commercial litigation.

Schedule a Call with a Miami Commercial Litigation Attorney at Gonzalez Law Offices, P.A.

If you need more information about the insurance considerations involved in commercial disputes in Florida, we invite you to get in touch. To schedule a call with a Miami commercial litigation attorney at Gonzalez Law Offices, P.A., please call 305-676-6677 or inquire online today.