Credit unions are businesses and businesses have to deal with claims. A member may sue the credit union, an employee may go to the EEOC or the credit union may draw a counter-claim on a collection action. There are numerous circumstances in which a credit union might find itself on the receiving end of a lawsuit or an administrative action.
It’s important to remember that the first thing that the credit union should do is forward the claim to the insurance company. The credit union may have coverage and if it does, the insurance company may not only resolve the claim but pay any legal fees and costs too.
This is not to say that after the claim goes to the insurance company that you should forget about it, far from it! You should almost always get the claim to the credit union’s attorney as well in case the claim requires immediate action. This could happen if a complaint filed against the credit union floats around the office for a while before it lands on the decision-maker’s desk. Even if the insurance company will ultimately hire its own lawyer to defend the claim, the credit union’s attorney can take the necessary steps to protect the credit union in the short term and avoid, for example, a default judgment being awarded against it.
Even lawyers sometimes forget to file claims with insurance companies. I have seen one instance where a law firm defended a credit union in a suit all the way through to the end. It was when the credit union received the bill (in excess of $20,000) that someone thought to raise the question: “should this have been submitted to insurance?” Needless to say, that’s an embarrassing moment for the law firm because a credit union is not going to be very interested in paying a bill for a lawyer when the lawyer should have told the credit union CEO to submit the claim to insurance in the first place.
So remember, when the credit union receives a claim against it, the first thing to do is fax or email a copy of the claim to the insurance company and then get it to counsel as soon as possible.