Insurance Law

Court Holds That a Coinsurer’s Notice of a Claim Brought Against a Mutual Insured Qualified as a Valid Tender Despite Policy Provision Requiring the Insured Itself to Provide Notice

Millennium Labs., Inc. v. Darwin Select Ins. Co., 2014 U.S. Dist. LEXIS 170439 (S.D. Cal. Dec. 9, 2014), [enhanced version available to subscribers].

In Millennium, the Southern District of California rejected an insurer’s argument that because a notice letter was sent from a coinsurer—rather than from the insured directly—it was not a proper tender pursuant to a policy term requiring notice to come directly from an insured. After the insurer took this position in connection with the tender of two underlying claims based on alleged violation of the Lanham Act, 15 U.S.C. § 1125(d) et seq., [enhanced version available to subscribers], the insured filed the Millennium action. The insurer then filed a “Motion to Terminate the Duty to Defend” based on the alleged failure of the insured to properly tender the actions. In denying the motion, the Millennium court held that, under California law, an insurer’s duty to defend may arise when the insurer receives “constructive notice” of its contractual duty. According to the court, because it was undisputed that the co-insurer sent the defendant carrier a letter tendering the insured’s defense, and which included all necessary information required to provide notice, the co-insurer’s letter qualified as a valid tender. The court reached this conclusion despite the fact that the notice provision in the defendant carrier’s policy specifically required notice directly from the insured, and despite the fact that it was undisputed that the insured did not directly tender its defense of the underlying action to the defendant carrier.

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