Know Alaska's insurance laws: protect your company by being informed.

• Author: Waller, Jeff
• Position: Legal Speak

"Your company has the right to an attorney of its choice." This is not something you would expect to hear from an insurance company when a business has been sued, but there are common situations were this exact situation arises.

CLAIMS ACCEPTANCE

For example, your business has been sued for negligence and an intentional act (like defamation or intentional infliction of emotional distress), so you send the complaint to your insurer because you have a commercial general liability (CGL) insurance policy. Assuming there is a duty to defend your business, the response from the insurance company may include either a statement that the insurance is accepting the claim "without reservation" or that the insurance "reserves its rights."

If the insurance company accepts the claim "without reservation," then the insurance company selects the lawyer who will represent the insured business. In this situation, the insurance company and the business have the same interests--stated another way; the insurance company is not going to deny coverage based upon any policy or coverage defense (i.e., the policy covers only negligent acts, not intentional acts).

If the insurance company "reserves its rights," that means the insurance company may assert it does not have to pay any of the claim or may only pay a portion of the claim (leaving the rest to be paid by your business) based upon a policy or coverage defense.

In this situation, there is a conflict of interests between the insurance company and your business. As more information about the claim or lawsuit is obtained, the insurance may discover facts showing that coverage under the liability policy is excluded for various reasons.

CHI COUNSEL

Because of this conflict of interests your business wanting the insurance to cover the claim if any amount has to be paid and the insurance company believing that the claim may not be covered completely or at all--the insurance company has to provide the business with what is called "CHI Counsel" in Alaska. The term "CHI" comes from the name of the insurance company (CHI of Alaska) in the case where this issue was first decided by the Alaska...