Filed Under:Claims, Litigation

Record Retention

When litigation is pending or foreseeable, create a litigation hold memorandum

Insurance brokers cannot always "avoid E&O," and often are faced with the separate but related decision of how best to "defend E&O." This process typically begins as soon as the broker reasonably believes an E&O claim might be asserted. This month we address the importance of litigation hold memoranda and retaining records, both electronic and paper, when litigation is pending or foreseeable.

Parties to a lawsuit are under a duty to preserve what they anticipate to be requested in a litigation. Failure to do so could lead to severe penalties against the offending party. The duty to preserve begins when the party in possession of the evidence knows litigation by the party seeking the evidence is pending or probable, and the party in possession of the evidence can foresee the harm or prejudice that would be caused to the party seeking the evidence if the evidence were to be discarded.

To help put this in context, let’s consider the following scenario. In March 2007, Ida Insured uses Diligent Insurance Agency to place property coverage. In September 2007, Ida Insured submits an insurance claim, but the applicable policy limits are insufficient to cover the loss. Diligent maintains records relating to Ida Insured’s insurance in four places:

  1. In a paper file
  2. Electronically on a server
  3. On Pete Producer’s email program
  4. On Pete Producer’s computer.

When Pete quoted the insurance in early 2007, he exchanged several emails with Ida regarding the coverage limits. Pete believes that in one of the emails, he advised Ida that she should consider higher coverage limits. Ida disputes this. The email was not saved on Diligent’s server, and was not printed and placed in the paper file.

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