HNRK Coverage Corner
On April 8, 2024, the Sixth Circuit issued an opinion in Great Am. Fidelity Ins. Co. v. Stout Risius Ross, Inc., Case No. 23-1167/1195, holding that, under Michigan law, an insurer was entitled to seek reimbursement of defense costs upon a finding it had no duty to defend.
Although the policy “did not expressly authorize such reimbursement,” the Sixth Circuit, making an “Erie guess” as to how the Michigan Supreme Court would resolve the issue, found that where “an insurer explicitly reserves its right to reimbursement and notifies the insured of the specific possibility of reimbursement, the parties form an implied-in-fact contract for reimbursement of costs expended by the insurer for claims it had no duty to defend.”
We have written extensively about this topic (see our prior posts on this blog here, here, here, here, and here, and a longer article, published by Law360 here).
The implied-in-fact contract argument strikes us as way off base. The purpose of a reservation of rights letter is to reserve the insurer’s rights under the policy—not to unilaterally create new rights after the fact.
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Bradley Nash represents policyholders in insurance disputes and other parties in complex commercial litigation in state and federal courts in New York and across the country. Brad focuses his practice on insurance recovery for ...
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