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EMERGING ISSUES WITH INSURER RECOUPMENT OR REIMBURSEMENT FROM POLICYHOLDER

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The document discusses issues insurers face when seeking reimbursement or recoupment from policyholders for defense costs and settlements. It may be possible for insurers to recoup costs if they reserve their rights early, notify the policyholder, and the policyholder is meaningfully involved in the defense. However, policy language and the timing of notices are important. Insurers should control the process by maintaining close oversight of defense costs and coordinating with other insurers and experts.

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EMERGING ISSUES WITH INSURER RECOUPMENT OR REIMBURSEMENT FROM POLICYHOLDER Daniel W. Gerber Esq. Goldberg Segalla LLP [email_address] 716.566.5425 www.goldbergsegalla.com
油
Understanding the Issue Assume 10,000 asbestos claims against manufacturer with exposure from 1950 until 1990 In 1990, with few claims made, policies are found for 6 years from Alpha insurer and 3 years from Beta insurer A cost share is entered with insured paying 25% of defense and indemnity Insurers agree on and appoint defense counsel In 1995, thousand of claims pour in and two insurers agree to a cost share of 2/3 and 1/3 In 1990 Alpha reserves its rights to recoup In 1995, thousand of claims pour in and two insurers agree to a cost share of 2/3 and 1/3
In 1990 Alpha reserves its rights to recoup In 1999 Beta reserves its rights to recoup In 2001 Charlie insurer found with 3 years of coverage Charlies policy requires reimbursement Insured contributes to one claim in 2003 then refuses to contribute In 2004, Alpha unilaterally drops its defense payments to 25% leaving an unpaid amount to defense counsel Several settlements after 2003 and each carrier reserves Insured is consulted and involved extensively in all claims and has paid to have separate monitoring counsel
Reimbursement of Defense Costs Step on the Buss ( Buss v. Superior Court ) Insurer must: Obtain a judgment of no coverage Show defense costs were solely attributable to uncovered portion/cause of action
Policy Language Implications Implied-in-law right (majority rule) Did insurer place insured on notice and reserve its rights? Did insured object? Policy language requirement (minority rule) Otherwise there is a unilateral amendment to the insurance contract
Logistics of Repayment Duty to defend considerations Timing and content of notice to policyholder Timing of declaratory judgment action Unilateral action and bad faith considerations Indemnity considerations
Recouping Uncovered Settlement Funds Majority allows where: (1) Insurer issues timely reservation (2) Insurer notifies insured of intent prior to settlement; and (3) Insured has meaningfully participated in defense and settlement Minority view Policy language controls Franks Casing
Fraud No applicable exclusion of limitation Coverage would otherwise exist under policy Policyholders actions makes it ineligible for coverage
Unilateral Mistake Can an insurer seek restitution for an erroneous payment? Yes Is detrimental reliance a consideration? Yes
Policyholders Defenses Against Repayment Equitable estoppel Can prejudice be shown? Waiver Collateral estoppel Lack of or timing of notice Lack of policy language
Key Considerations Look to the policy Reserve early and reaffirm often Considering making the defense contingent upon acceptance of reimbursement terms Considering asking policyholder to consent to arbitration before there is a dispute Considering an early affirmative declaratory judgment action Hiring coverage counsel to monitor the defense Leveraging coverage with claimant Investigate, understand and hire experts early
Key Considerations (Ethical Implications) Place policyholder and defense counsel on notice of billing requirement Ask for detailed/separate billing Seek defense counsels testimony Look to defense counsel representations in correspondence and court
PRACTICAL TIP Create a Claims Matrix Name of lawsuit(s) (i.e. Parties) and when filed Jurisdiction Claims alleged Status (i.e. initial pleadings, motion to dismiss, discovery) Amount sought as damages (if possible) What coverage is potentially available Corresponding DJ Matrix (if necessary)
Practical Tip Control Your Own Destiny
Practical Tip Control Your Own Destiny Use controlled aggression - Demand regular status meetings - Do not settle for written status updates - Get all coverage opinions relative to all jurisdictions - Challenge defense counsel - Develop your own defense theories - Keep apprised of defense costs - Demand detailed invoices Recognize that sometime you want to fly under the radar Avoid being surprised!!!
Practical Tip Two Heads Are Better Than One
Practical Tip Two Heads Are Better than One Organize meetings/calls with other insurers Make alliances Strength in numbers Be cognizant that other carriers on your tower may not have identical interests (i.e. dont be bound by unilateral decisions) Negotiate Cost Share Agreements
Practical Tip Be Ready for Anything
Thank you and Happy Holidays! Daniel W. Gerber Esq. Goldberg Segalla LLP [email_address] 716.566.5425 www.goldbergsegalla.com

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EMERGING ISSUES WITH INSURER RECOUPMENT OR REIMBURSEMENT FROM POLICYHOLDER

  • 1. EMERGING ISSUES WITH INSURER RECOUPMENT OR REIMBURSEMENT FROM POLICYHOLDER Daniel W. Gerber Esq. Goldberg Segalla LLP [email_address] 716.566.5425 www.goldbergsegalla.com
  • 2. 油
  • 3. Understanding the Issue Assume 10,000 asbestos claims against manufacturer with exposure from 1950 until 1990 In 1990, with few claims made, policies are found for 6 years from Alpha insurer and 3 years from Beta insurer A cost share is entered with insured paying 25% of defense and indemnity Insurers agree on and appoint defense counsel In 1995, thousand of claims pour in and two insurers agree to a cost share of 2/3 and 1/3 In 1990 Alpha reserves its rights to recoup In 1995, thousand of claims pour in and two insurers agree to a cost share of 2/3 and 1/3
  • 4. In 1990 Alpha reserves its rights to recoup In 1999 Beta reserves its rights to recoup In 2001 Charlie insurer found with 3 years of coverage Charlies policy requires reimbursement Insured contributes to one claim in 2003 then refuses to contribute In 2004, Alpha unilaterally drops its defense payments to 25% leaving an unpaid amount to defense counsel Several settlements after 2003 and each carrier reserves Insured is consulted and involved extensively in all claims and has paid to have separate monitoring counsel
  • 5. Reimbursement of Defense Costs Step on the Buss ( Buss v. Superior Court ) Insurer must: Obtain a judgment of no coverage Show defense costs were solely attributable to uncovered portion/cause of action
  • 6. Policy Language Implications Implied-in-law right (majority rule) Did insurer place insured on notice and reserve its rights? Did insured object? Policy language requirement (minority rule) Otherwise there is a unilateral amendment to the insurance contract
  • 7. Logistics of Repayment Duty to defend considerations Timing and content of notice to policyholder Timing of declaratory judgment action Unilateral action and bad faith considerations Indemnity considerations
  • 8. Recouping Uncovered Settlement Funds Majority allows where: (1) Insurer issues timely reservation (2) Insurer notifies insured of intent prior to settlement; and (3) Insured has meaningfully participated in defense and settlement Minority view Policy language controls Franks Casing
  • 9. Fraud No applicable exclusion of limitation Coverage would otherwise exist under policy Policyholders actions makes it ineligible for coverage
  • 10. Unilateral Mistake Can an insurer seek restitution for an erroneous payment? Yes Is detrimental reliance a consideration? Yes
  • 11. Policyholders Defenses Against Repayment Equitable estoppel Can prejudice be shown? Waiver Collateral estoppel Lack of or timing of notice Lack of policy language
  • 12. Key Considerations Look to the policy Reserve early and reaffirm often Considering making the defense contingent upon acceptance of reimbursement terms Considering asking policyholder to consent to arbitration before there is a dispute Considering an early affirmative declaratory judgment action Hiring coverage counsel to monitor the defense Leveraging coverage with claimant Investigate, understand and hire experts early
  • 13. Key Considerations (Ethical Implications) Place policyholder and defense counsel on notice of billing requirement Ask for detailed/separate billing Seek defense counsels testimony Look to defense counsel representations in correspondence and court
  • 14. PRACTICAL TIP Create a Claims Matrix Name of lawsuit(s) (i.e. Parties) and when filed Jurisdiction Claims alleged Status (i.e. initial pleadings, motion to dismiss, discovery) Amount sought as damages (if possible) What coverage is potentially available Corresponding DJ Matrix (if necessary)
  • 15. Practical Tip Control Your Own Destiny
  • 16. Practical Tip Control Your Own Destiny Use controlled aggression - Demand regular status meetings - Do not settle for written status updates - Get all coverage opinions relative to all jurisdictions - Challenge defense counsel - Develop your own defense theories - Keep apprised of defense costs - Demand detailed invoices Recognize that sometime you want to fly under the radar Avoid being surprised!!!
  • 17. Practical Tip Two Heads Are Better Than One
  • 18. Practical Tip Two Heads Are Better than One Organize meetings/calls with other insurers Make alliances Strength in numbers Be cognizant that other carriers on your tower may not have identical interests (i.e. dont be bound by unilateral decisions) Negotiate Cost Share Agreements
  • 19. Practical Tip Be Ready for Anything
  • 20. Thank you and Happy Holidays! Daniel W. Gerber Esq. Goldberg Segalla LLP [email_address] 716.566.5425 www.goldbergsegalla.com