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Court: policy language does not limit insurer’s defense outlay

A recent insurance-linked court outcome outside Louisiana is broadly instructive, setting forth a judicial ruling and reasoning that is logically of interest to national insurers.

OneBeacon is one such insurer. That company offers insurance products to consumers across the United States, including in Louisiana. One service provided by OneBeacon is its safeguarding against risk as a reinsurer for other insurance company clients.

It is as a reinsurer that OneBeacon has over the past year found itself embroiled in litigation in Pennsylvania, losing court cases at every level of that state’s judicial system.

The core contention in OneBeacon’s protracted dispute with two other insurance companies it had reinsured revolved around policy language.

Specifically, ambiguous policy wording. That was the assessment of successive courts in the OneBeacon matter as its case wound its way through Pennsylvania’s appellate system.

The state’s Supreme Court recently ruled that provisions in OneBeacon’s reinsurance policies with its customers were not clear in setting forth a policy cap regarding losses and litigation defense costs. OneBeacon was tasked with paying out $11 million to cover its clients against liability in asbestos claims. The court also upheld lower-court rulings as well, though, which had flagged OneBeacon with an additional $7 million-plus in outlays its customers had spent on defense costs.

OneBeacon argued that its stated policy limit was intended to cover all claim-related costs. Justices’ rejected that argument based on their inability to see any language limitation expressly focused upon comprehensive liability concerning a claim. The court stated that reasonable interpretation supported the view that the $11 million policy limit applied only to losses, with expenses incurred for defending the claim being additional costs to be borne by OneBeacon.

There is a clear take away for insurers from the litigation in the form of an imperative.

And that is this: Insurance companies must absolutely ensure that policy language is as clear and unequivocal as it can be regarding every material detail of coverage and representation.

Proven defense attorneys with a deep well of experience drafting, defending and enforcing policies can centrally help with that.

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