Allocating Defense Costs Among Multiple Insurers and Between Covered and Uncovered Claims

Description

There has been a recent trend, and some controversy, surrounding the practice of insurers seeking reimbursement of defense costs for non-covered claims. Courts are divided as to the insured’s right to recover pre-tender defense costs. And, a long-running coverage battle persists between insurance companies and policyholders on the allocation of defense costs between covered and uncovered claims.

One of the most complex issues in insurance coverage disputes involves long-tail claims—such as asbestos bodily injury and environmental claims. Such claims raise complex questions of how defense costs should be allocated among multiple insurers and policy years triggered by such losses.

A court’s or jurisdiction’s application of either the all sums or pro-rata allocation theories to indemnity does not necessarily dictate that the court will allocate defense costs in the same manner. Courts that have adopted the pro-rata allocation of liability but have allocated defense costs under an all sums theory employ various rationales, including the fact that the insurer’s duty to defend is broader than its duty to indemnify. 

Listen as our authoritative panel of insurance practitioners reviews the competing theories for allocating defense costs among multiple insurers, focusing on case law developments and recent trends. The panel will outline effective strategies for both insurers and policyholders for arguing for the most favorable allocation methodology.