In a recent opinion, a U.S. District Judge in Massachusetts held that with respect to an underlying action, a liability carrier had no duty to defend or indemnify either of the two parties which the carrier subsequently sued in the carrier's action for declaratory relief and for reimbursement. The two defendants sued by the carrier are its policyholder and an additional insured, both of whom it defended and for whom it entered into the settlement of the underlying action.
Besides holding that the liability carrier had no duty to defend or indemnify, the Court in this case further held that the carrier is entitled to reimbursement from the defendants. Berkley Nat'l Ins. Co. v. Granite Telecomm's LLC, ___ F. Supp. 3d ___, No. 21-10626-RGS, 2022 WL 3021107, at *4-*6 (D. Mass. July 29, 2022).
The recent opinion mentions that Berkley, the liability carrier, defended and settled only after being threatened with a lawsuit under "[Mass. Gen. Laws ch.] 176D," but it does not appear to repeat the significance of the liability carrier's reservation of rights, as the Court did in an earlier Order in this case.
The Court in this case cited its earlier Order as a short-hand reference for the background behind the parties' dispute. In that earlier Order, the Court denied the policyholder's and the additional insured's motion for judgment on the pleadings, pointing out that the liability carrier in this case reserved the right to reimbursement from them:
Berkley capitulated, but reserved its right to subsequently deny coverage under the Policy’s bacteria and pollutant exclusion provisions and seek reimbursement.
Berkley Nat'l Ins. Co. v. Granite Telecomm's LLC, Doc. No. 78, Order Denying Motion for Judgment on the Pleadings at 3, filed March 28, 2022 (D. Mass. No. 21-10626-RGS), 2022 WL 899423, at *1.
That made all the difference. See generally 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:6, Informing the Insured: Insurer Assertion of Rights to Reimbursement From the Insured of Clearly Noncovered Indemnity and Defense Expense (3d Edition Thomson Reuters West, 2022 Supplements in process).
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