Liability Insurance Coverage Disputes

A liability policy should provide a defense when a lawsuit potentially falls within coverage. As a liability insurance coverage lawyer for Illinois businesses, Allison Cho Law represents companies in Chicago and the North Shore when an insurer refuses to defend, defends under a reservation of rights, or denies indemnity for a settlement or judgment.

Illinois sets a high bar for refusing to defend. The insurer compares the complaint to the policy, and if any allegation falls within or potentially within coverage, it must defend the entire suit, even if the claims are groundless. An insurer that believes there is no coverage has two choices: defend under a reservation of rights, or ask a court to decide coverage in a declaratory judgment action. One that simply walks away may be barred from raising its coverage defenses later. When two insurers refuse to defend and point at each other, Illinois also lets the insured choose which insurer to tender to.

A defense under a reservation of rights is not the same as coverage. The letter preserves the insurer’s right to deny indemnity later, and when the insurer’s interests conflict with the policyholder’s, for example because the facts that decide liability also decide coverage, the policyholder may be entitled to independent counsel at the insurer’s expense. Illinois insurers generally cannot recover the defense costs they paid unless the policy expressly allows it.

Coverage fights often surface at settlement. Exclusions for pollution, contractual liability, and professional services are the usual grounds for denying indemnity, and a late notice defense requires more than delay alone. An insurer that unreasonably rejects a settlement within the policy limits may owe more than the limit if the case later produces a larger verdict.

If your business has been sued and the insurer has denied a defense, reserved its rights, or refused to fund a settlement, schedule a consultation before defense costs build or settlement talks begin.