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Innocent Insured Mother Can Collect Where Additional Insured Son Is Alleged to Have Started Fire, Massachusetts Federal Court Rules

burning houseIn an important victory for policyholders, the Massachusetts Federal Court recently granted coverage to an innocent insured whose son was alleged to have caused the fire that destroyed the family house. Massachusetts insurers – in this case Metropolitan Property and Casualty – often deny coverage to a named insured where an additional insured, such as a family member, intentionally causes a fire or other loss. A property owner who had nothing to do with a fire can thus be left with a burnt home and no coverage.

This new ruling clarifies that Massachusetts is on its way to joining the majority of states where an innocent insured can receive coverage if not involved in the fire.

Insurance Coverage: Massachusetts Insurers Cannot Recoup Defense Costs Provided Under Reservation of Rights

A Massachusetts Superior Court last month issued a significant victory for policyholders. In the case Holyoke Mutual Insurance v. Vibram, the court ruled that an insurer that provides a defense under a reservation of rights may not later recoup attorney fees from the policyholder if a court ultimately determines there to have been no coverage.

Someone sues you or your company. You submit a claim to your insurance carrier. Your insurer hires a lawyer to represent you. But then your own insurance company turns and brings a new suit against you for a declaratory judgment that it no longer needs to pay your lawyer in the underlying case. In many states, if the court ultimately determines there to be no coverage, the insurer can then go so far as to recoup from you the money the insurer paid your lawyer. At least for now, that is not the law in Massachusetts.