Potential and actual claimants and their counsels often request or even demand an engineer’s professional liability insurance information prior to the initiation of litigation and, in some instances, prior to even sending a demand letter.
In a few jurisdictions, such as Florida, the engineer and/or its carrier may be statutorily required to provide certain insurance information including the name of the insureds and the insurer, the policy number, and the policy limits, and/or to provide the actual policy to both potential and actual claimants and/or their counsels prior to litigation.1
However, in the vast majority of jurisdictions, there is no requirement to provide third parties with the engineer’s professional liability insurance information prior to the initiation of litigation.2 In these instances, the professional liability insurance company will usually ask the insured if they want to release the information to the claimants or their counsels and then proceed accordingly.3 As this decision is often left to the engineer, it is important to weigh the pros and cons before making a decision to disclose the requested information. The most obvious drawback to releasing insurance information is providing the claimant a reason to pursue their claim against the engineer. The claimant may see the insurance company as a deep pocket from which it can obtain payment in the event of a large judgment or at least from which to extort money. Thus, the release of this information may increase the possibility of a lawsuit, especially a nuisance suit.
Additionally, the disclosure of this information may encourage claimants to inflate their damages to capture all monies available. It is often no coincidence that the claimant’s demand is at or near policy limits after such information has been disclosed.
On the other hand, disclosing insurance information may be helpful to the engineer under certain circumstances. For example, it could be beneficial if the engineer is likely to be held liable and does not have enough insurance to cover the potential judgment. In this example, disclosure may help obtain an early settlement within the policy limits and before the limits have eroded too much, thus avoiding personal exposure. Because the policy limits of a professional liability insurance policy usually include claims expenses, which typically include defense fees and costs, it may be beneficial for both the engineer and the claimant to avoid litigation in favor of settlement. Thus, the release of this information may encourage a mutually beneficial settlement.
As the pre-litigation disclosure of insurance information may have a significant effect on filing a lawsuit, an engineer should carefully consider disclosing in consultation with their lawyer prior to making any decision.
1Fla. Stat. § 627.4137 (Lexis 2018) (finding that an insurer shall provide within 30 days of a written request by the claimant, the name of the insurer, the name of each insured, the limits of liability coverage, a statement of any coverage defenses, and a copy of the policy).
2McKnight v. Singapore, Inc., Case No. 72,672, 1996 Kan. App. Unpub. LEXIS 1278, at *5-6 (Ct. App. March 22, 1996).
3See Cal. Ins. Code § 791.13 (Lexis 2018); see also Griffith v. State Farm Mut. Auto. Ins. Co., 281 Cal. Rptr. 165, 169-71 (Cal. Ct. App. 1991) (finding policy limits are personal information protected by Cal. Ins. Code § 791.13 and cannot be disclosed to claimants without authorization from the insured).