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Defense Cost Reimbursement

Some insureds may find it surprising that the insurer can get reimbursement from the insured for some of those legal costs expended.

By David D. Thamann | Updated on November 04, 2009
The duty of an insurer to defend an insured under the terms of a commercial general liability (CGL) coverage form is an accepted part of the form’s insuring agreement. Insurers have generally had no problem with the judicial interpretation that this duty to defend is separate from and broader than the duty to indemnify. Insureds take it for granted that once the insurer assumes the defense of the insured, the insurance company will pay the legal expenses involved in defending them.

Some insureds may find it surprising that the insurer can get reimbursement from the insured for some of those legal costs expended. It is true that the current standard general liability policy does not alert the insured that he may have to reimburse the insurer for some defense costs, but this right of reimbursement has a solid foundation in the law.

A Look at Case Law

One of the more enlightening court decisions in this area is Buss v. Transamerica Insurance Company, 939 P.2d 766 (Cal. 1997). In this case, the California Supreme Court decided that an insurer may seek reimbursement from an insured for defense costs.

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