Chapter 14, H. Payment of Defense Fees Due Within the SIR

• Jurisdiction: United States

H. Payment of Defense Fees Due Within the SIR

The insured is typically responsible for the payment of defense fees for claims that fall within the SIR. However, an insured who has filed bankruptcy has no incentive to defend those claims. In a liquidation, the claims will be discharged against the debtor, but the claimant will be allowed to pursue the debtor nominally to reach insurance proceeds. In a reorganization, a plan will typically provide that the claimants will only be allowed to collect any claim from available insurance proceeds. While the insured may be contractually obligated to pay the defense costs, as a practical matter it will be up to the insurer to pay these costs.

The court in Eastern Retailers Serv. Corp. v. Argonaut Ins. Co....