When insurance coverage is in question for a liability suit, parties initially focus on whether the pleadings require the insurance company to defend its insured.

Whether the insurance policy actually covers the judgment or settlement obtained against the insured, however, often turns on the resolution of certain key facts by the court, such as whether bodily injury was ‘expected or intended’ from the standpoint of the insured.

Similarly, while parties may argue over the value of a claim or suit when a settlement demand is made, the determination of whether the value actually exceeds an insurer’s policy limits typically is made by a judge or jury.

Without the presence of the insurer in the lawsuit, plaintiffs and insureds may attempt to use these proceedings to establish dubious factual findings or excessive damage awards in an effort to ‘set up’ the carrier for bad faith.

Outside of direct-action states like Louisiana and Wisconsin, U.S. courts traditionally have not allowed insurance companies to intervene in the underlying suit to participate in these factual determinations, instead requiring them to assert their positions in subsequent declaratory-judgment actions.