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In a world of uncertainty, few things in life are more guaranteed than liability insurers reflexively rejecting claims for pre-notice defense costs, even where there is no legitimate or principled basis to do so. In a perfect world, insureds would immediately notify their insurers as soon as a claim or suit arises to avoid insurers refusing to pay or credit pre-notice defense costs. But companies operating in the real world for various reasons sometimes investigate and defend claims or suits before formally notifying their insurers.  In that circumstance, insurers should not be permitted to avoid their coverage obligations for so-called “pre-tender” defense costs for each of the following reasons.

Many courts only require notice to the insurer – not “magic words” or a formal “tender” – to trigger an insurer’s defense obligations

Insurers often argue their defense obligations only arise after the insured formally “tenders” or specifically requests a defense of a claim or suit, even though many courts have flatly rejected this premise. E.g., White Mountain Cable Constr. Corp. v. Transamerica Ins. Co., 631 A.2d 907, 910 (N.H. 1993) (“in order for an insured to tender the defense to the insurer, it need only put the insurer on notice of the claim”). Indeed, many courts correctly have held that the insurer’s defense obligations are triggered upon receipt of “actual notice” from any source – even if not directly from the insured seeking coverage. E.g., Cincinnati Cos. v. West Am. Ins. Co., 701 N.E.2d 499, 505 (Ill. 1998) (“the insurer’s duty to defend is triggered by actual notice of the underlying suit”).  Absent specific policy language or legal precedent to the contrary, insureds should not be required to formally “tender” or request a defense to obtain the benefit of its coverage once the insurer is on notice of the claim or suit – particularly where the insurance policy delegates the duty to defend to the policyholder rather than the insurer.Continue Reading Maximizing recovery of pre-notice defense costs: Considerations for policyholders

Insurance disclosure requirements have just become far more complex and onerous for parties that face litigation in New York state courts. In our January article (updated in February), we discussed the particulars of New York’s new Comprehensive Insurance Disclosure Act as it stood when the legislation was signed into law in late December 2021 and as contemplated by amendments proposed by the governor and being considered by the legislature. In late February, many of these proposed amendments were enacted into law.

With the law now seemingly settled, defendants are just beginning to grapple with this legislation, including developing long-term strategies for managing disclosures, taking stock of insurance-related information to get ahead of disclosure obligations, and initiating conversations with insurance coverage counsel, brokers and insurers. Until New York courts provide more direction regarding the application of the law, advance preparation and planning by policyholders to satisfy the legislation’s requirements will be key.

Recent amendments

As indicated above, the Comprehensive Insurance Disclosure Act was amended shortly after its passage. Three of these amendments in particular are worth noting. First, where the original version of the law was retroactive in applying to all existing lawsuits, the law now is limited to only those lawsuits filed on or after January 1, 2022. Second, defendants now have 90, rather than 60, days after service of an Answer to disclose the insurance-related information required by the law. Third, the law is no longer confined to policies sold or delivered in New York; instead, defendants must disclose responsive policies regardless of where the policy was procured or delivered.Continue Reading Policyholders grapple with strategies for responding to New York’s new insurance disclosure law