Reimbursement of Defense Costs

I doubt there is anything that has been the subject of more incessant chatter at seminars, with less to show for it, than the question of when, or if, an insurer can obtain reimbursement of defense costs incurred on uncovered claims. Ever since the California Supreme Court issued its ruling in Buss, the issue has been the focus of much excited talk - perhaps more than it has ever really been the subject of any action - and understandably so, given that insurers have been paying defense costs for what seems like an eternity on uncovered claims because of the long established rule that an insurer must provide a defense against the entire case if even only one claim in the action is covered. One can easily see how the possibility of putting an end to that would grab the imagination of an entire industry.

Finally, though, someone has really shed more light than heat on the issue. Thanks to David Rossmiller, here is insurance coverage litigator Randy Maniloff’s detailed look at the question. One thing I liked in particular was Randy’s conclusion, which hints at exactly why, as suggested above, the issue has generated more talk than actions by insurers to recover defense costs from their insureds: namely, that the sheer difficulty of allocating defense costs between covered and uncovered claims makes recovering defense costs difficult even in those jurisdictions where such recovery is allowed. On a perhaps more cynical note, it seems to me that courts can also be expected to rely on this fact to protect insureds from reimbursement claims, even in states that allow such claims, in cases where reimbursement strikes the court as inequitable.

Post A Comment / Question

Remember personal info?