When it comes to litigation within condos and co-ops, it’s a complicated process that involves multiple parties; board directors, residents, attorneys, managing agents and insurance professionals. Lawsuits can develop from a number of issues such as property issues, bodily injury issues or breach of contract. They can come from anywhere, regardless of truth or merit.
There is usually a back-story, and the carrier prefers to be notified as soon as you become aware so that they can prepare themselves and their best defense for the insured. It’s important to note that insureds should never try to handle without the aid of the carrier. Doing so can compromise the carrier’s ability to reduce and/or control liability and may hinder defense or even result in a claim denial.
The determination of whether the substance of the suit is covered or not will dictate the process of answering the complaint. Defense and indemnification will be determined once coverage has been evaluated, meaning—once the carrier is made aware, they do their investigation, and will announce if coverage exists. In the event of an affirmative coverage determination, the carrier has a few options. Sometimes they will provide only defense, and sometimes they will provide both defense and indemnification, depending on the type of allegations.
Defending vs. Settling
In most situations, the carrier has the right to determine how to handle a case, in terms of taking it to court or settling. Cost is the biggest factor when it comes to settling. If the defense will be costlier than settling, it’s likely the insurer will settle to avoid the legal fees to defend an action that will settle for less. Another determining factor is whether or not settling would bring on similar claims and additional actions. Under certain circumstances, alternative dispute resolution may be an option to resolve a lawsuit. This method helps to resolve disputes outside of the courtroom with the help of a third party.
Lawsuits can be costly and complex undertakings. Following the correct protocol in a timely manner is crucial to the most favorable handling of the lawsuit.
If you have any questions, please contact our liability claims manager, Denise Caballero.