In U.S., ex. rel. Barcelona Equip., Inc. v. David Boland, Inc., No. CA 11-2295, 2014 WL 6901229 (E.D. La. Dec. 5, 2014), the Eastern District of Louisiana denied a policyholder’s motion for partial summary judgment brought under Louisiana law, rejecting the argument that an insurer had waived its insurance coverage defenses under a commercial general liability insurance policy by failing to provide a timely coverage decision regarding a property damage claim.
In the underlying action, the policyholder, a subcontractor on a flood protection project, sued the company from which it had rented an industrial hammer, seeking damages relating to the alleged failure of the equipment. Id. at *1. The equipment supplier asserted counterclaims, alleging that the policyholder had damaged the equipment, causing a loss of rental income; and failed to pay amounts due under the rental contract. Id. The insurer received notice of the property damage claim on April 12, 2012. Id. On June 4, 2012, the insurer requested additional information regarding the claim. Id. On June 18, 2012, the policyholder requested that the insurer confirm its duty to defend within seven days. Id. After the insurer failed to respond, the policyholder filed a coverage action against the insurer, alleging that the insurer’s failure to deny coverage in a timely fashion constituted a waiver of its coverage defenses. Id. On February 20, 2013, the insurer issued a reservation of rights letter, acknowledging a duty to defend, denying coverage as to the policyholder’s alleged failure to pay rent, and reserving its rights regarding the loss of rental income allegations, explaining that it needed to investigate the property damage allegations. Id. at *2.
In evaluating the policyholder’s claim of waiver, the district court began by explaining that under Louisiana law, waiver occurs “when there is an existing right, a knowledge of its existence and an actual intention to relinquish it or conduct so inconsistent with the intent to enforce the right as to induce a reasonable belief that it has been relinquished.” Id. at *3 (citing Steptore v. Masco Constr. Co., Inc., 643 So.2d 1213, 1216 (La. 1994)). As such, waiver requires “(1) misleading conduct on the part of the insurer and (2) prejudice.” Id. (citation and internal quotation marks omitted). The court also explained that waiver is generally at issue “where an insurer provides a defense without timely reserving its rights as to coverage.” Id. at *4. Waiver is premised on the need to “guard against improper conflicts of interest” between the insured and insurer. Id. at *3-4.
In rejecting the policyholder’s waiver argument, the court ruled that the insurer had not demonstrated “misleading conduct on the part of the insurer,” explaining that although it was dilatory in responding to the policyholder, the insurer’s “inaction under the facts of this case does not constitute misleading conduct.” Id. at *4. The court also noted that the insurer had not waived its coverage defenses by providing a defense without reserving its rights to deny coverage. Id.
This case confirms that waiver principles are applied stringently and that a delay in providing a coverage determination, without more, may not constitute a waiver of coverage defenses