If you are general counsel, a risk manager, or any other upper-level executive for a U.S. company with a non-U.S. corporate parent (or sister company), you understand all too well that the tort and liability insurance system in the United States often makes non-U.S. business owners feel like strangers in a strange land. It can leave them at a loss for
words or uttering words that we cannot print in this publication. Surprise aside, the tort system in the U.S. giving rise to claims and liability is the twin of the insurance system that is designed to transfer risk and to compensate injury and harm. Simply put, “the
purpose of insurance is to insure.”
Non-U.S. corporations that have U.S. operations through subsidiaries eventually will face the U.S. tort system. Claims for asbestos, environmental harm, lead exposure, and many other long-term exposure or “toxic tort” situations all should be covered by insurance. In your role as a point-person for your company’s U.S.-based operations, you no doubt will have to explain to board members or counsel for the non-U.S. parent or other non-U.S. entities the intricacies of exactly how the U.S. insurance system may be a counterbalance to the U.S. tort system. We provide herein a primer on certain basic insurance concepts for non-U.S. businesses with U.S. operations, including the broad “duty to defend” under general liability insurance policies, certain improper efforts by insurance companies to limit coverage and settlement obligations, and steps that non-U.S. businesses should take to protect the insurance assets of their U.S. subsidiaries.