Surprising: NJ Court Says Insurer Needs Prejudice For Pre-Tender Defense Costs Disclaimer
I have long believed that, based on the New Jersey Supreme Court’s 1992 decision in SL Indus., Inc. v. Am. Motorists Ins. Co., an insurer need not prove prejudice to disclaim coverage for pre-tender defense costs.  The SL Industries court concluded that the duty to defend is triggered by facts known to the insurer and “if the insured does not properly forward the information to the insurance company, the insured cannot demand reimbursement from the insurer for defense costs the insurer had no opportunity to control.”  That differs from a complete disclaimer based on late notice, where New Jersey has a prejudice requirement.  But, in The Lewis Clinic for Educational Therapy v. McCarter & English, LLP, No. Mer-L-747-19 (Sup. Ct. N.J. Civ. Div. Jan. 13, 2020),  a New Jersey trial court recently called SL Industries merely “instructive” and concluded that the insurer was required to prove appreciable prejudice -- and it couldn’t. 

OCIP Exclusion Applies To Additional Insured – Even If Named Insured Not Enrolled In Wrap-Up Policy
For those who come across wrap-up issues in CD claims, check out Liberty Mutual Fire Ins. Co. v. Southern Owners Ins. Co., 18-81018 (S.D. Fla. Jan. 24, 2020).  The court concluded that an OCIP exclusion, in a CGL policy, applied to an additional insured, even though the named insured was not enrolled in the wrap-up policy: The court stated: “P&A Roofing undoubtedly qualified as an additional insured under the Southern-Owners’ policy. However, the policy had an exclusion. And following the same logic as the TNT court, this Court finds that the Southern-Owners’ OCIP Exclusion extends beyond its named insured (S&S Roofing) to its additional insured (P&A Roofing). Based on P&A Roofing’s undisputed enrollment in the Liberty Mutual Wrap-Up insurance program, the OCIP Exclusion in the Southern-Owners’ policy acts as a bar to coverage for P&A Roofing in the underlying state court action.”  The court clarified: “The exclusion contains no requirement for S&S Roofing to be enrolled or insured under any such wrap-up insurance program and such requirement will not be read into the exclusion.” 

How Strict Can “Four Corners” Be?  Really Strict.
In MMG Insurance v. Giuro, Inc., No. 19-0754 (M.D. Pa. Jan. 6, 2020), the court concluded that an insurer could not rely upon a fact outside the complaint to defeat its duty to defend.  The decision was under Pennsylvania law.  And Pennsylvania is a strict “four corners” state.  So why the hubbub?  Because the fact that would defeat the duty to defend was one that the insured admitted to.  But it was still not permissible to 86 the insurer’s duty to defend: “From a practical perspective we are of course sympathetic to MMG’s [the insurer’s] arguments. In the instant case, a state-court victim-claimant raised allegations that plainly trigger MMG’s duty to defend Guiro under Pennsylvania’s clearly articulated and strictly enforced four-corners rule. Before this Court, however, Guiro has admitted facts which, if true, would seemingly bring the claims outside the scope of the policy and would remove MMG’s duty to indemnify Guiro. As a consequence, this may also relieve MMG’s duty to defend Guiro under its policy terms. Thus, we are tasked with either enforcing Pennsylvania’s four-corners rule as we understand it or carving out an exception which would, in effect, gut the rule entirely. Absent further guidance, we refuse to do the latter. Such an exception, while perhaps logical and more equitable as applied to the case at bar, would also fly in the fact of the aforecited precedent. It is thus not for this Court to make that leap.”