Federal Courts Reject Insurers’ Attempts to Recoup Defense Costs Expended Under Reservation of Rights

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In situations where there is a dispute over a duty to defend and an insurer provides a defense to its insured, are defense costs recoupable?

April 11, 2022
Anthony L. Miscioscia & Margo Meta - White and Williams

In situations where there is a dispute over a duty to defend, an insurer may provide a defense to its insured, subject to a reservation of rights, to not only deny coverage for a defense, but also to file a declaratory judgment action and recoup defense costs in the event it is determined there is no duty to defend. But are defense costs recoupable? Last week, federal trial courts in Georgia and Pennsylvania answered this question with a resounding “no”.

In Chemical Equipment Labs, Inc. v. Travelers Property Casualty Company of America, Case No. 19-3441, 2022 U.S. Dist. LEXIS 61298 (E.D.Pa. Mar. 31, 2022), the United States District Court for the Eastern District of Pennsylvania was called to determine whether Travelers Property Casualty Company of America (Travelers) was entitled to reimbursement of defense costs after it was determined that it had no duty to defend its insured in an arbitration for breach of a charter agreement. The Travelers’ policies did not contain an express reimbursement provision. The court found that Travelers was not entitled to reimbursement because under Pennsylvania law, “[r]eimbursement of defense costs requires an express provision in the written insurance contract.”

Reprinted courtesy of Anthony L. Miscioscia, White and Williams and Margo Meta, White and Williams

Mr. Miscioscia may be contacted at misciosciaa@whiteandwilliams.com
Ms. Meta may be contacted at metam@whiteandwilliams.com



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