Under Government Investigation? There May Be Insurance Coverage For That
Any time a business learns that it or one of its executives or employees is under government investigation, it's a tough time.
The business needs to take several important steps right away to protect itself going forward.
One of those actions is often overlooked in the rush to address the investigation: notifying the company’s insurance carrier about the investigation and finding out if the insurance policy covers the cost to defend against the investigation.
So many times, when I meet with a new client that is a business under investigation or a business whose executives or employees are under investigation, I learn that they have not yet notified their insurance company about the investigation; and I urge them to do so immediately.
I understand that in those first moments when a business and its leaders are processing what is happening because their offices have been raided by the FBI; or it just received a grand jury subpoena; or, received other notice from the government that its under investigation or audit, it is difficult to know exactly what to do first. The first step is always to call your lawyer.
But the next step is a quick review of the insurance policies and a call to the business’ insurance company.
The costs to defend against government investigations and to answer government subpoenas can quickly run into hundreds of thousands or millions of dollars, depending on the nature of the investigation. Those costs can escalate even if your business or its employees are merely a witness in an investigation rather than its target.
Insurance companies read those long policies in the light most favorable to them. Without timely notice of a claim to the insurance carrier, a business risks having the insurance company deny coverage completely or, only cover defense expenses from the date the insurance company was notified. “Timely” notice is often sooner than you think—it’s often described as “as soon as practicable,” but you can imagine how insurers and businesses may have different views of that standard. Be sure to work with your lawyer about the level of information you share with your carrier.
Many policies will cover a business’ costs to defend against a government investigation to include defense costs for directors, officers, and employees who also may be under investigation.
Insurance may also cover forensic accountants, investigators and IT professionals to assist the lawyer in defending the case.
Although white-collar criminal defense lawyers usually don’t know insurance coverage law, a good white-collar criminal defense lawyer will know enough to tell you to call a good insurance coverage lawyer. If your insurance company denies coverage, you will need an insurance coverage lawyer to fight the insurance company’s decision. Most white-collar criminal defense lawyer will know insurance coverage lawyers they can refer you to.
Some cost containment advice - call your insurance company today . . . to make sure that your business is covered in the event of a government investigation, including criminal investigations.
Some directors’ and officers’ policies (D&O) exclude criminal investigations, leaving your business exposed if the government comes knocking.
This step is important if you are a federal government contractor because federal government contractors are exposed to a significant number of investigations, audits, and reviews that other businesses don't face. So, if you do work as a federal government contractor be sure your policy covers government investigations and audits beyond just criminal investigations.