قالب وردپرس درنا توس
Home / Insurance / Failure to request defense eliminates coverage until the insured asks

Failure to request defense eliminates coverage until the insured asks



HDI Global Insurance Company (“HDI”) requested an injunction eliminating its obligation to pay its insured’s defense costs prior to tender. HDI was sued by the plaintiff, Nucor Steel Louisiana, LLC (“Nucor”) and Dynamic Environmental Services, LLC (“DES”), claiming defense costs before tenders and other damages. Innucor Steel Louisiana, LLC et al. v. HDI Global Insurance Co., no. 21-1904, United States District Court, ED Louisiana June 1, 2022, USDC resolved the dispute in favor of the insurer.

BACKGROUND

The facts alleged in the complaint are as follows: HDI issued a commercial general liability policy (the “HDI Policy” or “Policy”) to DES, which provided coverage between November 1, 2016 and November 1, 2017. Nucor was another insured under the HDI policy.

On May 10, 2018, Bob Dale brought Comeaux II (“Comeaux”), a DES employee, a civil lawsuit (“Comeaux dispute”) to the 23rd Judicial District Court of the Parish of St. James, claiming to have been exposed. to hydrogen sulfide gas at Nucor’s plant facility on May 15, 2017. Comeaux was named defendant Nucor and DES.

On May 10, 2019, one year after Comeaux brought the action, lawyers representing Nucor Nucor’s defense and indemnity submitted to DES. On January 21, 2020, HDI sent correspondence to Nucor’s agents and agreed to defend Nucor, but reserved the right to compensation. On July 2, 2021, Comeaux’s claims on all defendants were settled through payment from HDI and the insurer for a third defendant. On August 4, 2021, HDI offered to reimburse Nucor’s defense costs under the tender procedure, totaling $ 37,067.47. Nucor rejected HDI’s offer and requested that HDI reimburse all of Nucor’s defense costs, including those incurred prior to the bidding process, totaling $ 135,950.75.

The plaintiffs claim that they have two avenues to support the reimbursement of Nucor’s defense costs before the tender procedure. First, Nucor is mentioned as an additional insured under the HDI policy, and the plaintiffs claim that HDI is obliged to reimburse its insured’s defense costs before and after the tender. Second, the plaintiffs claim that HDI must reimburse DES for its voluntary settlement of Nucor’s defense costs before and after the tender because the HDI Policy’s contractual liability clause covers DES ‘obligation to reimburse Nucor under ICA.

LAW AND ANALYSIS

HDI acknowledges that it is obligated to pay Nucor’s defense costs after the tender because Nucor is an extra insured according to the HDI policy. HDI argued that it is not obliged to pay Nucor’s defense costs before the tender.

HDI claims that its position is supported by Gully & Associates, Inc. v. Wausau Insurance Cos., 536 So.2d 816 (La. Ct. App. 1 Cir. 1988). IN Ravinethe Louisiana Court of Appeals for the First Circuit held that, since “the insurer’s obligation to provide a defense does not arise until the insurer is notified of the dispute… [the insurer] is not responsible for legal fees and costs incurred before the filing date. “

The language of the HDI policy repeatedly states that the insured must notify HDI of legal actions or events that may give rise to liability. In addition, the HDI policy states that “[n]o insured will, except at the insured’s own expensevoluntarily make a payment, assume any obligation or incur any cost, other than for first aid, without [HDI’s] consent.”

The court noted that it was the insured’s privilege to retain the lawyer they chose before notifying the insurer of the action, “but under the clear terms of the policy, they were required to exercise that privilege at their own expense.”

Contractual liability protection

Nucor’s defense costs

While an insurer’s obligation to defend does not arise until the insurer receives a notice or offer, the same principle does not apply to persons liable for compensation, such as DES. The general rule is that a tortfeasor is not obliged to notify, let alone file a defense, to the tortfeasor under a tort contract, unless the contract itself requires notification or a tender for defense.

Although Nucor is not entitled to reimbursement of defense costs before the tender because they are extra insured under the HDI policy, the question remains whether DES is entitled to recover its payment of Nucor’s defense costs before and after the tender from HDI, in accordance with the contractual liability provisions in the HDI policy.

HDI does not deny that ICA is an “insured agreement” within the meaning of the contractual liability provision. However, HDI denies that the contractual liability provision requires HDI to reimburse DES for its settlement of Nucor’s defense costs in the Comeaux case. In support, HDI noted that the contractual liability provision, in the relevant part, states that the policy covers “reasonable legal fees and necessary legal costs incurred by or for a party other than an insured. ” HDI claims that, since Nucor is an insured under the insurance, its legal fees and costs in the Comeaux disputes are expressly excluded from contractual liability.

According to the express language of the contractual liability provision, HDI is not obliged to reimburse DES for Nucor’s defense costs before or after tenders in the Comeaux dispute.

Since the court agreed with HDI’s interpretation of the policy, the court also concluded that HDI’s conduct was not incorrect or unjustified.

While Nucor has the right to recover charges from DES under ICA, Nucor does not have the right to recover charges from HDI under the Policy. DES is also not entitled to request compensation from HDI, in accordance with the Policy, for DES’s settlement payment of Nucor’s prosecution fees.

DES’s claims – as regards DES’s reimbursement of Nucor’s defense costs prior to tenders arising in the Comeaux case, Nucor’s legal costs to seek coverage under ICA and the HDI policy and penalties under La. RS 22: 1892 and 22: 1793 – are dismissed with prejudice.

If an insured wants to recover from a liability insurance, it is important that they notify the insurer of a need for a defense. In this case, the insured and the additional insured waited before requesting a defense. They were entitled to, and in fact received, the defense requested, from the moment the insured asked for defense. They are not entitled to the costs they incurred in defense before they notified the insurer. The lesson: “Do not sit on your rights. Ask for a defense immediately after you have been informed that a claim will or has been filed in court. “


(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his internship to the position of insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as a lawyer for insurance coverage and claims management and more than 54 years in the insurance industry. He is available at http://www.zalma.com and zalma@zalma.com.

Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe.

Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.

Write to Mr Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos on Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/




Source link