I gave a seminar recently to a group of in-house counsel on insurance coverage, and the theme of my talk was the need to go beyond – or at least look behind – standard insurance packages to instead tailor the insurance program to the specific needs and exposures of the particular company in question. For instance, policies often exclude or are silent – leaving it for debate at a later time, such as after a claim is made – on whether there is coverage for awards of attorneys fees or punitive damages. Companies, I suggested, need to survey their potential exposures and analyze whether, given the types of claims made against them historically and the jurisdictions in which they operate, they are at risk of such awards; if so, they then need to tailor their insurance programs accordingly with regard to such exposures, at the time of acquisition, rather than worrying about it only after a claim is made against them.
As a result, I greatly enjoyed this piece out of the New York Times, which gives that same advice from a practical perspective for smaller businesses. The article, in particular, focuses on the need to carefully consider the trade off between how much of the company’s revenue to tie up in insurance costs versus the potential costs to the company of a particular type of claim if it is not insured against.