by Ryan T. Leagre (Attorney Profile) [i]
Associate
Plews Shadley Racher & Braun LLP
1346 N. Delaware St.
Indianapolis, IN 46202-2415
(317) 637-0700
rleagre@psrb.com


The ability of a policyholder to recover pre-tender costs is an evolving area of insurance coverage law. In Dreaded, Inc. v. St. Paul Guardian Insurance Company, the Indiana Supreme Court held that, under the facts of that case, a policyholder could not recover the legal expenses it incurred defending itself from a claim asserted by the Indiana Department of Environmental Management (“IDEM”) prior to giving notice of or tendering the claim to its insurer. [1]. And while Dreaded was limited to the facts of that case, the Indiana Court of Appeals in Travelers Insurance Company v. Maplehurst Farms, Inc. interpreted Dreaded to mean that pre-tender costs are simply not recoverable. [2]. The courts’ decisions in Dreaded and Maplehurst rested, in part, on two grounds: (1) an insurer’s duty to defend its policyholder does not arise until the policyholder provides notice of the claim; [3] and (2) the insurance policy provision requiring a policyholder to give notice of a claim to the insurer is a condition precedent to coverage. [4].

Indiana courts should reconsider the holdings in Dreaded and Maplehurst. [5]. These holdings result in the forfeiture of coverage, which is unfair and disfavored under Indiana law, [6] and ignore the realities of long-tail environmental claims. [7]. To begin, Dreaded’s explanation of the duty to defend is incomplete. An insurer’s duty to defend its policyholder is not triggered by notice of the claim, but rather by the existence of a potentially covered claim. [8]

by Lara Langeneckert
Deputy Solicitor General
Office of the Indiana Attorney General
lara.langeneckert@atg.in.gov


Imagine you are a successful widget manufacturer, and you have just expanded your business by purchasing another widget company called Acme. In the sale, you received all of Acme’s corporate assets, including its commercial general liability (“CGL”) insurance policy [1] from Flanders Insurance. You are all set to begin producing more widgets than ever before when a lawsuit stops you in your tracks: Apparently, the day before you bought Acme, an Acme widget exploded and injured three people. Those people are now suing you, Acme’s successor-in-interest, to recover for their personal injuries.

A bad situation, to be sure, but you’re not too worried. After all, you have Acme’s CGL policy, so Flanders has to defend and indemnify you against this lawsuit, right? To give a classic lawyer answer: it depends [2]—mostly upon what jurisdiction you happen to be in. And if you are in Indiana, you are probably out of luck. This Article discusses the development of the law in this area, with a specific focus on Indiana. Specifically, this Article addresses two ways corporate policyholders can protect themselves both before and after a sale.