When Personal Injury Is Not "Personal Injury"

Robert D. Wurtz, CPCU

General Administrator of Wisconsin County Mutual Insurance Corporation

"Personal injury!"
We see this term in the newspapers, in our liability insurance policies, in prospective legislation, and in plaintiff law firm TV and print advertising. We all have an idea of what we think it means but the meaning of personal injury in our county liability coverages has some very important quirks and some small, but significant, financial differences. Let me preface my remarks by letting you know I am not an attorney and do not think or write like one. I have had some experience with personal injury and liability insurance, though. Unfortunately, I may (God help us!) write like an inshurents sailsmun! Hopefully, this will not hinder my relating some financially potent information to you.

Since the '60's, commercial insurers have had a written definition of personal injury floating around which basically defined it as libel, slander, defamation of character and other such norms of political behavior and county board meetings. It was an add-on form which required a specific premium of an additional 15% (those were the days) of bodily injury liability premium. This was the practice until the mid '70's or so, when some of the coverage of the original endorsement was made standard and most polices began to refer to "personal injury and property damage liability" instead of "bodily injury and property damage liability". This was a pretty slick maneuver on the part of the insurance carriers in that they were now "throwing in" personal injury. Unfortunately, what was thrown in was limited and if you desired coverage to the level of the old form you still had to buy the endorsement.

Since, many of the actions being filed involved employees, you also had to waive the employment exclusion, I think it was 'b', for an additional premium to get coverage for employment related areas where you most needed it! In the '80's Congress got into the act and discrimination became a statutorily defined personal injury. This was too wild for most carriers so they started defining personal injury, as afforded by their polices, as excluding discrimination. The plaintiffs bar, moving to help society to correct years of onerous discrimination (and incidently to reap a golden harvest of contingent fees), lined up clients with justified claims and some with perceived claims. The litigation mounted, most of it uninsured. Without insurance coverage, it was hard for successful claimants to collect for their damages so most claims were employment related and resulted in job related settlements because the litigation was expensive and not covered by insurance. This tended to make discrimination allegations and suits fairly effective tools for what the legislation intended, ending institutional discrimination.

If you have to pay out of your own pocket for legal defense you tend to only defend those claims that are very defensible. Public entities began buying special forms of Public Official's E & O coverage to get some level of protection. The 1991 civil rights legislation added damages to the equation, among other things, and has operated to improve the fertility of the "golden harvest". Statute now allows plaintiff's attorneys fees to be collected from the offending party in discrimination suits. The tactical problem for the plaintiff's bar was that a suit for damages triggered coverage under most of the Public Officials E & O forms. To obtain the maximum potential from a claim for a client (and hence, the attorney) some plaintiff's counsels have adopted the tactic of initially suing for injunctive relief only (plus plaintiff's attorney's fees in case the settlement precludes further action on the claim). If you do not or can not prevent further action, either because you do not try or the courts will not let you, the plaintiff can then file another suit for damages on the same causes of action after the defendant's culpability has been stipulated or otherwise established! Guess who wins then?

This gets us to the problem at hand. Many E & O policies and no commercial liability policies provide coverage for defending injunctive suits. (Injunctions, by the way require action but no "damages".) Since there are no "damages", coverage is not triggered even though the cause of action is covered by the policy. Aside from the danger of a follow-up suit, this gap in coverage is not just procedural, but definitely financial. As I understand it, in a recent Wisconsin Supreme Court decision in Shorewood School District v. Wausau Insurance Companies, after waffling, the court sided with Wausau Insurance Companies, along with USF&G, Crum & Forster, CNA and others. Shorewood School District thought that attorney's fees of around a half million dollars were damages. Wausau agreed that the action was covered by the policy they had issued to the school district, but argued that attorney's fees are not damages under the policy. After first rejecting the insurers' argument, the court reversed itself a couple of months later.

In the meantime, three northwest Wisconsin counties, became embroiled in an suit alleging discrimination, requesting injunctive relief and plaintiff's attorney's fees. Wausau Insurance, the carrier for two of the counties rejected coverage on the grounds that the suit was for injunctive relief only and involved no damages. One of the counties was insured by Wisconsin County Mutual. The Board of Directors, in reviewing the case on referral from the Claim Review Committee of the Mutual, determined that it would be a strategic error and not in the best interest of it's county member insureds, not to provide coverage and defense for the insured county. Further, because the other two counties had joined the Mutual after the actions which had resulted in the suit, extended ex gratia coverage to the other two counties. (The board reasoned that the defense of one county would cost no more than the defense of three counties for a defensible suit and the new counties were now members and peers.) The Mutual and the three counties won the suit in Federal Court while another defendant, who had no financial assets to speak of, did not and was assessed plaintiff's attorney's fees in excess of $300,000. The three counties, relying on their own resources may well have settled or lost and been the deep pockets to pay those fees. Somebody ducked a bullet there! After the first ruling on the Shorewood case by the Wisconsin Supreme Court, Wausau scrambled to negotiate with the Mutual to pay it's share (two-thirds) of the Mutual's defense costs (about $35,000) on the three county suit but before the money came through, the Supreme Court reversed itself and the carrier went happily on it's way.

What this means, is that to be able to secure defense and coverage for these types of claims, you better be insured with some one willing to look at the strategic view and your county's interests in mind. So far, commercial carriers do not seem to be there . Check with your carriers or agents and retain a written response you retain with your policy as to whether or not they define plaintiff's attorneys' fees as damages on injunctive or otherwise covered allegations. Personal injury today is one of the most important coverages a county can have. Even more importantly, the county must be assured that the coverage it is afforded for personal injury is as broad as possible and covers these highly likely contingencies.