Recovering Defense Costs From Insured If Coverage Later Denied
Robert Williamson at the Construction Owners & Builders Law Blog posts on an interesting topic. In a liability policy, you may not be able to tell if coverage is provided for an event until several months down the road. The insurer should offer to defend the insured while reserving the right to deny coverage later. If it later turns out that the insurance policy does not cover the specific event, the insurance company can stop defending its insured. What about the legal fees and other defense costs that the insurance company paid for in the meantime, though? Can an insurance company recover the legal fees and other defense costs from the insured if it turns out that none of the claims are covered by the insurance policy? Apparently, there is a split of authority.