Will Your Insurance Provide Coverage for Search Warrants or Subpoenas?
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May 12, 2021
INSURANCE
Will Your Insurance Provide Coverage for
Search Warrants or Subpoenas?
By Andrew M. Reidy and Christopher Schaf buch, Lowenstein Sandler
The term “search warrant” often conjures Congress
clichéd images of law enforcement officers
arriving unannounced at an office or residence Congress has incredibly broad oversight and
in hope of finding incriminating evidence. investigatory power that includes the ability to
Search warrants and other governmental subpoena the attendance and testimony of
investigative tools, however, can differ greatly witnesses at public hearings and the
in scope, are used in a wide variety of contexts, production of documents.[1] The Supreme
and can impose onerous obligations on the Court has held that “the scope of the power of
responding party. They can also be very costly [congressional] inquiry, in short, is as
if not covered by insurance. penetrating and far-reaching as the potential
power to enact and appropriate under the
In this article, we examine the diverse sources Constitution.” The precise scope of any
of subpoena power, suggest the best ways to particular congressional subpoena will vary
respond to different types of subpoenas and depending on which chamber, committee, or
provide six tips for ensuring that responding to commission issued it.
government investigatory requests is covered
by insurance. Congress might exercise its subpoena power in
either a focused and highly structured context,
See “Five Questions to Ask to Maximize D&O like its year-long investigation of the causes of
Insurance Coverage of FCPA Claims” (Jun. 21, the 2008 financial crisis; or pursuant to
2017). sweeping but brief ad hoc inquiries into issues
of national interest, like the Senate hearings on
Nearly Limitless Subpoena allegations that Facebook, Google, and Twitter
were censoring certain political views.
Power
See our three-part series introducing FARA:
The scope of subpoenas is extremely broad. “Definitions, Exemptions and Increased Risk”
They can issue from any of the three branches (Mar. 3, 2021); “The New Environment” (Mar. 17,
of government and may target practically any 2021); and “Enforcement and Compliance”
person or business. (Apr. 14, 2021).
©2021 Anti-Corruption Report. All rights reserved. 1Judiciary United States v. R. Enterprises, Inc., 498 U.S.
292, 300 (1991), grand jury subpoenas are
As the D.C. Circuit Court stated in Houston presumed legitimate “absent a strong showing
Business Journal, Inc. v. Office of Comptroller of to the contrary,” and, where a grand jury
Currency, U.S. Dep’t of Treasury, federal courts, subpoena is challenged on relevancy grounds,
unlike Congress, “are not free-standing “the motion to quash must be denied unless
investigative bodies whose coercive power may the district court determines that there is no
be brought to bear at will in demanding reasonable possibility that the category of
documents from others.” Article III of the materials the Government seeks will produce
Constitution limits the federal courts’ information relevant to the general subject of
subpoena power to cases where the court has the grand jury’s investigation.” (emphasis
subject-matter jurisdiction over the underlying added.)
action, or in certain circumstances where the
subpoena is necessary for the court to And, as a practical matter, a grand jury almost
determine its own jurisdiction. always returns an indictment presented to it
by the prosecutor. Federal prosecutors
That said, the federal rules of civil and criminal frequently have the opportunity to abuse these
procedure grant civil litigants, criminal investigative tools, without proper judicial
defendants, and federal prosecutors oversight, to reach practically any entity and
substantial leeway to compel third parties to embroil it in costly and complex investigations.
produce documents or attend and testify at a
deposition or hearing.[2] These judicial Law Enforcement and Agencies
subpoenas to non-parties can arise in
practically any context, including fraud cases Law enforcement officers can obtain a warrant
where key documents are held by a third- authorizing the search and seizure of certain
party, such as a bank, accounting firm, or persons or property.
construction company; a criminal investigation
where the government seeks records of the Many federal agencies likewise have
defendant’s telephone or internet history; or a substantial authority to investigate possible
personal injury claim where the parties require violations of law and to compel testimony or
municipal traffic camera footage of an the production of documents in pursuit of
intersection. those investigations and enforcement actions.
Grand Juries And many agencies, like the Drug Enforcement
Administration, Environmental Protection
A federal grand jury can subpoena documents Agency, and various agencies within the
and witnesses relevant to determining whether Department of Homeland Security, among
there is probable cause to support a criminal others, have the power to issue administrative
indictment. subpoenas and “civil investigative demands” in
furtherance of their respective functions.[3]
The grand jury subpoena power is Given the large number of federal agencies
extraordinarily broad and virtually that have such power, these subpoenas
unrestrained. For instance, as stated in naturally reach a wide variety of industries,
sectors, and legal issues.
©2021 Anti-Corruption Report. All rights reserved. 2State legislatures, courts, and agencies possess nature of the investigation and whether the
similar investigative tools. For practically every DOJ considers the recipient a witness, subject
federal mechanism for compelling the or target.
production of documents and testimony there
are state law analogs. There are a near- Experienced counsel will be able to determine
limitless number of contexts in which a person from this initial contact whether the client can
may be subject to a subpoena, search warrant, safely cooperate or whether a more adversarial
or other compulsory investigative tool. posture is prudent. Counsel may also need to
investigate to assess potential risks facing the
See “A Rare Jury Conviction for a Bribe-Taker client in what is typically an opaque and fluid
Proves the Worth of FBI Foreign Corruption process. The subpoena itself must be analyzed
Units” (May 24, 2017). to determine the scope of documents or
testimony sought.
Responding to Subpoenas
Depending on the scope of documents
Because the proceedings and investigations requested, counsel may need to work with the
from which subpoenas issue operate with client (and perhaps negotiate with the lead
varying degrees of formality, it is crucial to AUSA) to create strategic search terms that
have counsel that understands not only the minimize the client’s administrative burden
applicable law but also when and to what and exposure to risk.
extent the recipient’s obligations are
negotiable. Even though a subpoena might request oral
testimony, counsel may be able to negotiate
There are many contexts in which an individual holding a proffer (an interview with the AUSA
or company can be compelled to produce and, often, law enforcement agents) in hope of
documents and testimony, and each presents obviating the need for formal testimony. Yet
unique legal, practical and business-related even proffer sessions, despite their informal
challenges that require seasoned counsel to nature, require substantial time and
successfully overcome. Effectively responding preparation. Counsel usually must negotiate a
requires significant time to analyze the written proffer agreement that limits the
document request, review client records and government’s use of information obtained
data, coordinate with company officers and during the interview; prepare the client for the
employees (and occasionally government interview, including reviewing documents and
agents), and prepare the client for in-person discussing potential lines of questioning; and
testimony. ultimately attend the interview with client.
Grand Jury Subpoena Responses Search Warrant Responses
Upon receiving a grand jury subpoena, for The process of responding to a search warrant
instance, counsel will often want to contact stands in stark contrast to that of grand jury
the Assistant U.S. Attorney (AUSA) responsible subpoenas. When law enforcement agents
for managing the grand jury to determine the execute a search warrant, the target has
©2021 Anti-Corruption Report. All rights reserved. 3relatively little control over the scope of Normally, counsel should cooperate with the
documents sought and manner of collection. committee staff at this early juncture and
Even so, sophisticated counsel can provide thereby retain some control over the scope
invaluable guidance during the first minutes, and tone of the investigation. The Federal
hours, and days of a search and seizure. Rules of Evidence do not apply to
congressional hearings, only constitutional and
Counsel should monitor and make a record of common-law privileges may be asserted, and
the search, including keeping track of where the law is not settled on their availability in
the agents search, what they seize, and whom every context. This legal uncertainty is further
they interview or ask to speak with. Counsel reason to cooperate early in an investigation.
should also act quickly to identify and Typically, when a target asserts a privilege, the
segregate any privileged files, and to make committee will decide on a case-by-case basis
copies of all essential business records and if that privilege applies. The target has an
electronically stored information. opportunity to negotiate the scope of
documents withheld and/or lines of
Following a search, counsel typically will issue questioning prohibited under the privilege.
a letter advising the company to retain all Refusing to comply is rarely an option.
documents and suspend automatic destruction
mechanisms so to avoid allegations of Getting It Covered
spoliation or obstruction of justice. Often
counsel will also need to investigate further, Whether the subpoena recipient is a company
such as interviewing employees who spoke or an individual, the cost of responding to, or
with the government agents. Depending on the defending against, document requests and
circumstances, a full-scale internal search warrants in support of criminal
investigation may be necessary. investigations can be significant. Fortunately,
insurance policies can be a source for
See the ACR’s Guide to Mastering Internal recovering fees in responding to search
Investigation Interviews: “Logistics” (Feb. 5, warrants and subpoenas. Here are six tips to
2020); “Warming Up” (Sep. 30, 2020); and help increase the likelihood that insurance will
“Getting to the Truth and Adapting to the pick up the tab.
Pandemic” (Oct. 14, 2020).
1) Ensure Coverage for Non-
Congressional Subpoena Monetary Relief
Responses
It is important to get the best language in your
Navigating a congressional investigation policies at renewal. The most favorable
presents its own unique challenges and definition of claim includes coverage for a
opportunities. A congressional document “demand for non-monetary relief.” This
demand typically begins with private language is in many policies and should be a
correspondence and requests for voluntary minimum requirement.
cooperation. This correspondence may include
requests for private, informal interviews; the
production of documents; or written answers
to interrogatories.
©2021 Anti-Corruption Report. All rights reserved. 42) Review the Coverage and Give non-monetary relief” or “any proceeding
Notice brought or initiated by a federal, state of local
governmental agency.”[5]
Upon receipt of a search warrant or subpoena,
the Insured should review the potentially Courts have reached opposite conclusions
applicable coverages and give prompt notice to about whether an investigative subpoena or
any potentially applicable insurer of a search warrant constitutes “written demand
subpoena or search warrant. The notice should for monetary or non-monetary relief.” The
seek the full benefits of the coverage. The case contrast of Diamond Glass Cos., Inc. v. Twin
law relating to coverage for fees relating to a City Fire Ins. Co., 2008 WL 4613170 (S.D.N.Y.
warrant or subpoena is mixed but driven in Aug. 18, 2008) with Agilis Benefit Services, LLC
good measure by the specific policy language v. Travelers Cas. & Sur. Co. of Am., 2010 WL
and the specific facts presented. 8573372 (E.D. Tex. Apr. 30, 2010) is an example.
Most insurance companies will not agree to For some courts, such as in Ace Am. Ins. Co. v.
pay for defense costs incurred prior to notice. Ascend One Corp., 570 F. Supp. 2d 789 (D. Md.
This underscores the importance of giving 2008), it has been important to determine if
notice as soon as the Insured becomes aware the Insured is a target or potential target.
of the subpoena or search warrant. Everyone
should be aware subpoenas and warrants may The highest likelihood for coverage is where
result in significant fees and coverage should subpoenas and investigative demands are
be reviewed and noted early. issued by governmental investigative agencies
related to an investigation of the Insured.
The best place to start a search for applicable
insurance is to examine your Directors and 4) Pay Attention to State Law
Officers (D&O) or Errors and Omissions (E&O)
policies. These policies may cover both the All insurance law is state law. It is imperative
corporate entity and individuals. The policies that an insured analyze coverage under the
typically cover broadly defined “Wrongful Acts” potentially applicable laws and, in the event of
and are triggered once a “Claim” is made. The a subpoena, make a forum selection mindful of
key to insurance coverage often is whether the importance of which law will be applied to
there is a “Claim.” the insurance contract.
3) Review What a “Claim” Is 5) Benchmark the Insurer’s
Language
The definition of “Claim” varies and the precise
definition used often determines coverage.[4] Often, it is helpful to demonstrate the scope of
language in an insurance policy by examining
The definition of Claim is often a multi-part the language an insurer had available but chose
definition. The language that most frequently not to use. The best evidence is an insurer’s
has been favored to cover subpoenas and own forms, but the same point could be made
warrants is “a written demand for monetary or through demonstration of what language was
being used in the market.
©2021 Anti-Corruption Report. All rights reserved. 56) Don’t Be Dissuaded by a “No” Sovereign Immunities Act litigation and federal
grand jury proffers.
Most claims representatives do not have
extensive experience with respect to evaluating This article was co-written by Mark Schamel,
coverage for search warrants or subpoenas. An Joseph Saka and Renee Jones.
insurer’s claim representative’s denial should be
reviewed carefully. Too many insureds will
simply accept a denial without an analysis.
See, e.g., House Rule XI, clause 2(m)(1) and (3);
[1]
Senate Rule XXVI, para. 1.
Andrew Reidy is a partner at Lowenstein [2]
See Fed. R. Civ. P. 45; Fed. Rs. Crim. P. 17, 41.
Sandler. He represents policyholders in disputes
against insurance companies in connection with See 18 U.S.C. §§ 1968, 3486; 21 U.S.C. § 876; 22
[3]
a wide variety of insurance policies and his U.S.C. § 4833.
practice includes a broad spectrum of legal
services, from counseling companies on how to See, e.g., BioChemics, Inc. v. AXIS Reinsurance
[4]
maximize an insurance recovery to representing Cov., 924 F.3d 633, 640-41 (1st Cir. 2019) (holding
policyholders in mediation, arbitration, that, under the specific terms of the policy, a
litigation, and trial in state and federal courts. subpoena served by the Securities and
Exchange Commission during the policy period
Christopher Schafbuch is an associate at was not a “Claim” in its own right, but rather a
Lowenstein. He defends individual and component of a “Claim” that had been made
corporate clients faced with white collar before the policy period).
criminal charges, government investigations and
complex business disputes. His experience Onvoy, Inc. v. Carolina Cas. Ins. Co., 2006 WL
[5]
includes federal appeals of civil and criminal 1966757 (D. Minn. July 11, 2006) (grand jury
matters, False Claims Act litigation, Racketeer subpoena).Even so, sophisticated counsel can
Influenced and Corrupt Organizations Act provide invaluable guidance during the first
claims, allegations of securities fraud, Foreign minutes, hours, and days of a search and seizure.
©2021 Anti-Corruption Report. All rights reserved. 6You can also read
