Part 3: Similarities and differences between a DIY project and the interpretation of an insurance policy

Continuing today, for what it's worth, a reflection on constructing a cabinet and how courts should engage in the proper construction of an insurance policy. For Part 1 of this series, click here. For Part 2, click here.

Even with pre-drilled holes that lined up perfectly, I knew I was going to have a tough time trying to put the cabinet drawers together.

And I did.

First off, how could I hold the two pieces of wood – or wood-like material (after all, this was not a particularly expensive cabinet kit) – at right angles to each other and screw them together? I calculated that I would need at least three hands.

Yet, somehow, after what seemed like a day and a half, but was probably more like an hour and a half, I got the first of the five cabinet drawers finished. Well, all but the drawer guides actually, but the instructions said not to do that until all five drawers were assembled.

The second drawer went faster.

By the time I finished with the third drawer, I had begun to wonder whether there was a Nobel Prize for drawer assembly and, if so, whether I was eligible.

Here, of course, I was irrationally exuberant. But I have experienced at least a little flush of euphoria when an apparent solution to an insurance coverage problem has occurred to me, and I expect that judges who handle such cases have experienced this, too: The organizational plan of a policy of insurance, jumping from coverage part to endorsement and back, and back again somewhere else, is not always obvious. And policy language is often dense and obscure at best, perhaps even prolix---now there’s a word you hardly ever see used except in conjunction with insurance policies---so it is, I hope, understandable that one might feel some sense of accomplishment when the policy starts coming into focus.

But this giddy feeling can lead one astray.

After finishing the drawers, I was supposed to attach the metal drawer guides. I of course referred back to the instructions, trying to figure out which went on which side and how it was to be affixed to the drawer. Even with a magnifying glass, the drawings were no help. So, as Dr. Suess said of the Grinch, I puzzled until my puzzler was sore. Lining up the holes was no help: These lined up in several different ways, even in ways that I could see that would certainly not work.

Eventually, I settled on a configuration that seemed consistent with the directions. I put the guides on one drawer and, thankfully, had the presence of mind to try inserting that drawer into the cabinet first.

It fit.

It rolled in and everything.

But it was obviously wrong.

With this configuration I might get three drawers into the cabinet, but certainly not the five that were supposed to be there. And they’d be spaced like Michael Strahan’s front teeth.

Here was a perfect illustration of how an insurance policy must be construed as a whole in order for the policy construction to be correct: If all a judge looks at is the narrow issue—does the drawer fit?—the problem was solved. Call the next. But, if I had allowed myself to declare victory (and say to heck with the two other drawers), I was 100% certain my decision would be reversed once my wife got home.

If this had been an actual court case, however, instead of a DIY project, you can bet there would be someone advocating in favor of the three-drawer solution. And the judge charged with resolving the matter might be tempted to be “fair.”

I know how wrong this sounds, but at least when it comes to insurance cases, I don’t want judges to be fair---at least if ‘fairness’ involves departing from the path described by the policy, and only by the policy.

I can best explain this with some anecdotes.

Not too many years ago I had the privilege of representing a carrier on coverage matters. Basically, the carrier hired me to give opinions concerning disputes it had with its insureds in specific instances. My role was to figure out how a court should decide the controversy. So when I said ‘pay this claim’ it wasn’t because Jack was feeling generous on Thursday but because I had concluded, after reviewing the policy and the applicable case law, that the Circuit Court of Cook County would most likely order the claim paid. Similarly, if I said ‘let’s fight this one,’ it wasn’t because I was hard up for billing, though I usually was, but because I genuinely believed that the Circuit Court of Cook County, when presented with the policy and the facts of the dispute, would find that it had no choice, under the law, but to agree with my carrier.

While it may be different with enormous exposures in environmental cases, at the level I was operating at---mostly liability and D&O policies for condominium associations---there was no strategic or financial incentive to litigate ‘close’ cases. If I told the carrier a case might go either way, the carrier generally opted to accept coverage. It was cheaper.

The problem with this practice is that one has to be right. All the time. Now this is my blog and you’ll just have to take my word for it that I never once suggested filing a declaratory action where I wasn’t absolutely right on the law. At the very least you have to admit I tried very hard to be right.

For example, where a policy provided the insured with coverage for “negligent” acts, and the underlying complaint expressly charged the insured, in both counts, with conduct that was “intentional, malicious and egregious,” I advised the carrier there was no duty to defend.

Easy-peasy, right? Open and shut?

I lost that case.

The trial judge, apparently trying to be “fair,” noted that the plaintiff could have drafted a sufficient complaint for the same relief without alleging intentional or malicious conduct. Which---by the way---was absolutely true. It was also, in the law, completely and totally irrelevant: “It is the actual complaint, not some hypothetical version, that must be considered” in determining whether an insurer has a duty to defend. Steadfast Insurance Co. v. Caremark Rx, Inc., 359 Ill.App.3d 749, 761 (2005).

In most cases---in nearly all cases, in my experience, except this one---a plaintiff’s attorney will do his or her darndest to craft a pleading that will implicate the defendant’s insurance coverage. Because, if the carrier can be forced to pay for a defense, it may also fund a settlement, or at least contribute to a settlement. This is called pleading into coverage and, if I may so myself, when I have assisted in the representation of plaintiffs who were faced with the problem of problematic coverage on the other side, I have been pretty good at it.

In the case I’m referring to here, however, the plaintiff hated the defendant so much that he did not want the defendant to have coverage. Without giving away too many identifying details, though the underlying suit was one seeking damages (including punitive damages of course), the plaintiff’s real object was not so much money as it was control of certain property. Defendant’s attorney (and I know this because he was also counsel for the insured in my ill-fated declaratory case) begged his opponent to file an amended complaint that would properly trigger coverage. To absolutely no avail.

You can imagine how losing such a case was received by my client. Who expected me to be able to read a policy and the case law and properly advise it on how a court would likely rule when presented with the question. But, you may say, this could be an instance where the judge was simply wrong---judges, like all people, are fallible beings---and the court’s decision in that case was simply erroneous and not an instance of misguided “fairness.”

But I have some additional anecdotes that will, I hope, help to illustrate my point and I will get to these in the next installment.

To be continued Wednesday....