This article was also published in Advisen.
Something has gone wrong — something unforeseen, unfortunate, and expensive. An insurance company’s refusal to pay a claim can be devastating. Now you have a two-front war: You must contend with the cost and consequence of your loss and deal with your insurance company’s refusal to pay.
Some jurisdictions will force the insurance company to pay your legal fees regarding the coverage dispute. These courts have recognized that without this potential consequence, insurance companies have an incentive to breach their duties under the insurance policy.1 By using this “opportunistic breach,” an insurance company may deny coverage wrongfully, continue to collect and invest premiums during its well-financed coverage litigation, and the only penalty it risks is paying the policyholder the same coverage it owed all along.