Insurance – Duty to Defend – Complaint & Deposition – Notice

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The complaint in the underlying action—alleging Philip Riley was exposed to chromated copper arsenate (CCA)—indicated that Riley had been exposed in an occupational context. Riley was born on December 27, 1978, and the defendant-insurer’s policy was in effect from January 1, 1978 through January 1, 1979. However, during his deposition, Riley testified that he had been exposed from birth. Since Riley’s deposition testimony indicates a possibility that Riley could have been exposed to CCA between his birth and the end of the term of defendant’s policy, defendant had a duty to defend its insured in the underlying action.

The parties’ cross-motions for summary judgment are granted in part and denied in part.

Although the underlying action was initiated in 2014, the insured did not seek a defense and indemnity until September 1, 2016. Nevertheless, a genuine issue of material fact exists as to whether the insured’s notice of the underlying action was reasonable under the circumstances. The original complaint in the underlying action did not raise the possibility of coverage given that it alleged Riley was exposed to CCA as an adult. In the light most favorable to the insured, its failure to notify the insurer of the underlying action in 2014 was reasonable.

However, the insured is entitled to reimbursement, if at all, only for fees and costs incurred after March 16, 2016. It was only after Riley’s deposition in March 2016 that a possibility of coverage, and thus a possibility of breach of contract on the insurer’s part, arose.

Even though the insured did not notify the insurer of the underlying action until September 2016, an insurer’s duty to defend arises when an underlying suit is brought against the insured with allegations that are arguably within the scope of the insurance policy’s coverage, not when the insured tenders proper notice of the underlying suit or explicitly demands a defense thereto. In order to deny the insured recovery for fees and costs incurred before September 1, 2016, the insurer must demonstrate substantial prejudice—something which it has not done at this time.

Where the sum allegedly due under the parties’ policy is capable of being reduced to certainty, prejudgment interest may be awarded.

Motions granted in part, denied in part.

Koppers Performance Chemicals, Inc. v. Travelers Indemnity Co. (Lawyers Weekly No. 002-003-22, 14 pp.) (Richard Gergel, J.) 2:20-cv-2017. Laura Figueroa Locklair and Robert Friedman for plaintiff; Charles Norris, Ezra Gollogly, Lee Ogburn, Steven Klepper, Mark Steven Barrow, Brandon Robert Gottschall, Joseph Madden and Timothy Domin for defendants. D.S.C.