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Anatomy of an Insurance Coverage Dispute

Thu, 03/16/2017 - 13:34 -- admin25

by Alan Rosenberg

I am often asked if insurance coverage litigation is just like any other commercial litigation matter. My response is “yes, except for the facts … and the law.”

Insurance coverage litigation, by its nature, is a contract dispute. Unfortunately, the contract involved is often thought of as the most convoluted and confusing type of contract, which judges and juries often interpret inconsistently. As a result, verdicts and court opinions are all over the map—figuratively and literally—as it is not uncommon for a single insurance provision to have varying interpretations throughout the country. As a result, the approach to prosecuting or defending an insurance coverage dispute often differs from other commercial litigation matters.

 The first question to address before filing a coverage suit is whether state or federal court is the proper venue. It is common for a United States District Court to have jurisdiction, as insurers and insureds are commonly found in different states and the amount in controversy frequently exceeds $75,000. 28 U.S.C. §1332(a).

Because of the complexities of coverage disputes, insurance practitioners often try to trigger federal jurisdiction. However, local state court judges and juries are frequently deemed well-equipped to handle such complexities. Others believe federal jurisdiction is irrelevant so long as a jury hears (or does not hear) the case.  

Another significant issue requiring consideration before filing a coverage dispute is which state’s law most favors the client’s interests and whether you can invoke jurisdiction to trigger that state’s laws. Frequently, this becomes the biggest pre-filing research challenge for several reasons.

First, many insurance coverage disputes involve the interpretation of several different provisions. If the law in a jurisdiction is favorable to your client’s position on one provision, it may be grossly unfavorable on another. Second, it may not be possible to trigger state law that is most beneficial to your client because of the location of the parties and/or the transactions at issue. Finally, even if there is an argument that a case can be filed in a particular state, that state’s choice-of-law analysis may require the court to apply another state’s laws. The results of any given coverage dispute may hinge on which state’s law applies, so this can become the most important aspect of a coverage lawyer’s analysis.

The most common question I receive from non-insurance attorneys, or their clients, is whether attorneys’ fees are recoverable should the insured need to file suit against an insurer that has declined coverage for all or part of a given claim. The answer, like in any other commercial litigation matter, depends on the causes of action that are alleged.

In most insurance coverage disputes filed in Texas, the causes of action against an insurer are: breach of contract; violation(s) of the Insurance Code; violation(s) of the DTPA; breach of the duty of good faith and fair dealing; breach of fiduciary duty; bad faith; and/or to obtain a declaratory judgment. Attorneys’ fees are recoverable for many of these causes of action, but one may be required to segregate and account for fees between claims for which attorneys’ fees are recoverable and those for which they are not.

Burden of proof issues often arise in insurance coverage disputes. Although there are exceptions to the rule, the insured has the obligation to prove that a claim falls within coverage, while the insurer has the burden to prove that an exclusion applies to preclude coverage under the subject policy. Like many other issues, however, it is rarely that simple.

This article only touches on some of the issues involved in litigating insurance coverage matters. Other issues, such as the duty to defend, subrogation, trigger and allocation of coverage, and compliance with notice requirements are also on the list of issues to consider when filing insurance coverage disputes. Due to the complexities of coverage disputes, some practitioners devote their entire practices to the nuances of insurance policy interpretation and litigating coverage disputes. It is easy to see why.


Alan Rosenberg is the head of the Insurance Coverage section at Stuber Cooper & Voge, PLLC. He can be reached at

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