More and more often insureds are being forced to litigate with their insurers to protect rights under insurance policies, while at the same time those insureds must actively defend against the very litigation for which they seek insurance coverage. Indeed, insurers often will pursue litigation against their insureds to establish the absence of any coverage obligation if there appears to be a question regarding the existence of a defense or indemnity obligation with respect to underlying litigation. Alternatively, due to potentially applicable statutes of limitation, or a need to seek judicial intervention to force an insurer to assist in an underlying defense for which the insurer has refused coverage, an insured may be required to file coverage litigation before underlying litigation is concluded.
In either circumstance, the insured can be prejudiced by being forced to litigate on “two fronts,” expending resources in coverage litigation that should be reserved to adequately defend against the underlying litigation. Additionally, to the extent that insurers seek to rely upon issues being litigated in an underlying action as the basis to avoid coverage, there is a clear risk that the insured will be required to litigate the same issues in two different courts before two different judges. This is inefficient and can lead to inconsistent results to the detriment of the insured. Underlying defense counsel also could be required to become involved in the coverage action, in an effort to ensure that issues at the heart of the underlying action are adequately resolved in the coverage litigation. This, of course, further depletes resources that should be focused solely upon defeating the claims in the underlying action. Indeed, allowing an insurer to attack its insured in coverage litigation on the same grounds asserted by underlying plaintiffs in underlying litigation, instead of assisting its insured in its defense against those very claims, is counterintuitive to the concept of insurance.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]