The Biggest General Liability Insurance Decisions of 2021
Two of 2021's biggest general liability rulings paved the road for insurance companies to recoup defense costs paid for uncovered claims, while the Florida Supreme Court allowed a carrier to pursue legal malpractice claims against a firm that allegedly botched its policyholder's defense.
The Ninth Circuit also had a hand in another crucial decision of 2021 when it asked the Nevada Supreme Court to determine if an insurer can recoup defense costs for an uncovered claim. A Silver State high court majority then said in March that Nautilus Insurance Co. could seek to recover the more than $500,000 it spent defending medical implant company Access Medical LLC and its manager Robert Clark Wood II in a suit lodged by a former business partner.
Seth Lamden of Blank Rome LLP agreed with the dissent, saying the fact that Nautilus' policy did not include a right to recoupment of defense expenses should have been the deciding factor.
Lamden, who represents policyholders, went on to say that the ruling was flawed because an insurance company can't reserve a right that it never had in the first place. He also said it did not make sense for the majority to find that "equitable considerations" were controlling because the terms of the relationship between Nautilus and its insured are based in contract.
"Permitting recoupment is inconsistent with an insurer's broad duty to defend," Lamden elaborated. "If an insurance company is not sure about its defense obligations, it can start defending under a reservation of rights, it can file a declaratory judgment action asking the court to find there is no duty to defend and if it wins, the insurance company can stop defending."
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“The Biggest General Liability Insurance Decisions of 2021,” by Shane Dilworth was published in Law360 on December 20, 2021.