No Right to Pre-Tender Defense Costs

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HDI Global Insurance Company (“HDI”) sought an order eliminating its obligation to pay pre-tender defense costs of its insured. The USDC resolved the dispute in favor of the insurer.

BACKGROUND

HDI issued a commercial general liability policy (“the HDI Policy” or “the Policy”) to DES, providing coverage between November 1, 2016 and November 1, 2017. Nucor was an additional insured under the HDI Policy.

On May 10, 2018, Bob Dale Comeaux II (“Comeaux”), a DES employee, filed a civil action (“the Comeaux litigation”) alleging that he was exposed to hydrogen sulfide gas at Nucor’s plant facility on May 15, 2017.

On May 10, 2019, one year after Comeaux filed suit, attorneys representing Nucor tendered Nucor’s defense and indemnification to DES. On January 21, 2020,

LAW AND ANALYSIS

HDI recognizes that it is required to pay Nucor’s post-tender defense costs because Nucor is an additional insured under the HDI Policy. HDI argued that it is not required to pay Nucor’s pre-tender defense costs.

Contractual Liability Coverage - Nucor’s Defense Costs

HDI disputes that the contractual liability provision requires HDI to reimburse DES for its settlement of Nucor’s defense costs in the Comeaux action. In support, HDI noted that the contractual liability provision states, in relevant part, that the Policy extends to “reasonable attorneys’ fees and necessary litigation expenses incurred by or for a party other than an insured.” HDI submits that, because Nucor is an insured under the policy, its attorney’s fees and costs in the Comeaux litigation are expressly exempted from contractual liability coverage.

Under the express language of the contractual liability provision, HDI is not required to reimburse DES for Nucor’s pre- or post-tender defense costs in the Comeaux litigation.

DES’s claims-as to DES’s reimbursement of Nucor’s pre-tender defense costs arising in the Comeaux action, Nucor’s litigation costs in pursuing coverage under the ICA and the HDI Policy, and penalties pursuant to La. R.S. 22:1892 and 22:1793-are dismissed with prejudice.

ZALMA OPINION

If an insured wishes to recover from a liability insurance policy it is essential that they give notice to the insurer of a need for a defense. In this case the insured and the additional insured waited before asking for a defense. They were entitled to, and actually received the defense asked for, from the moment the insured asked for defense. They have no right for the costs they incurred for defense before giving notice to the insurer.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected].

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