Wednesday, November 23, 2016

Massachusetts Appeals Court holds insurer not liable for pre-notice attorney's fees

While this headline might seem as though the court were stating the obvious, no appellate court in Massachusetts has ever clearly ruled on whether an insurer is responsible for attorney's fees incurred by the insured prior to notice to the insurer of the claim.  At least one federal decision held that an insurer is liable for such costs unless the insurer proves prejudice.  
In Rass v. The Travelers Cos. Inc., __ N.E.3d __, 2016 WL 6636281 (Mass. App. Ct.), the Massachusetts Appeals Court put the issue to rest.  It held that an insurer has no duty to pay for the defense costs incurred prior to notification of the claim. 
The reasons the court gave for its holding are sensible:  An insurer cannot be aware of a duty to defend until notice is given, and it cannot breach a duty of which it is unaware.  Prior to receiving notice an insurer is unable to control or minimize costs.  If an insurer were responsible for pre-notice costs an insured could delay providing notice so as to control its own defense for as long as possible. 

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