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of the policy on which a disclaimer of coverage may be based. W.T.A. v. Yeager, 832 So. 2d 1217 (La. Ct. App. 3d 2002).
Waiver/Estoppel
The failure to timely notify an insured of a disclaimer will not result in waiver or estoppel that would provide coverage for acts not included under the policy. Balehi Marine, Inc. v. Fire- men’s Ins. Co. of Newark, N.J., 460 So. 2d 16 (La. Ct. App. 1st 1984).
However, “when an insurer, with knowledge of facts indicating noncoverage under the insurance policy, assumes or continues the insured’s defense without obtaining a nonwaiver agree- ment to reserve its coverage defense, the insurer waives such policy defense.” Steptore v. Masco Const. Co., Inc., 643 So. 2d 1213, 1216 (La. 1994). See also Leflore v. Coburn, 665 So.2d 1323 (La. Ct. App. 4th 1995).
As the Louisiana Third Circuit has noted, “a tacit waiver or interruption of prescription may be found if the insurer; (1) continues negotiations, thereby inducing the insured to believe the claim will be settled or not contested, (2) makes an uncon- ditional offer of payment, or (3) performs acts of reparation
or indemnity.” Bennett v. State Farm Ins. Co., 869 So. 2d 321, 329 (La. Ct. App. 3d 2004).
An insurer who retains an attorney to file an answer on behalf of the insured, and the attorney files an Answer on behalf of the insured prior to the issuance of a reservation of rights letter, waives its right to assert a coverage defense when the Petition for Damages provides the insurer with sufficient information
to determine that a coverage defense existed. Rivers v. Daigle, 210 So.3d 815 (La. Ct. App. 3d 2017). In Rivers, the insurer retained an attorney to file an answer and defend the insureds prior to issuing a reservation of rights letter. The insurer con- tended that the insureds never believed that coverage existed under their policy, and that because the insurer’s actions did not “induce [the insureds] into believing that its policy provided coverage for the accident,” the insurer’s actions did not preju- dice the insureds and the coverage defense was not waived.
In rejecting this contention, the Court noted that the Petition for Damages provided sufficient information to determine that a coverage defense existed and that the insurer should have conducted further investigation prior to retaining an attorney and filing an answer on behalf of the insureds.
If an insurer has knowledge of facts indicating non-coverage and voluntarily assumes the insured’s defense without obtain- ing a non-waiver agreement to reserve its rights, the insurer effectively waives all such policy defenses. Peavey Co. v. M/V ANPA, 971 F.2d 1168, 1175 (5th Cir. 1992). In order to defeat a claim of non-waiver, the insurer must demonstrate that it is- sued its reservation of rights letter to the insured and employed separate counsel within a reasonable time after it was informed of the claim against its insureds. See Emery v. Progressive Cas. Ins. Co., 49 So.3d 17, 21 (La. Ct. App. 1st 2010).
Conversely, an insurer did not waive its coverage defense
even though counsel retained by the insurer filed an answer on behalf of the insured and the insurer prior to the issuance of a reservation of rights letter. Breazeale v. T. T., 117 So.3d 192 (La. Ct. App. 1st 2013). In Breazeale, the insurer initially retained an attorney to represent both the insurer and the insured, which included filing responsive pleadings on behalf of both. Six weeks after the initial, jointly-filed answer, the insurer substituted separate counsel for the insurer, who filed
a supplemental and amending answer solely on behalf of the insurer asserting a coverage defense. The insurer issued a reservation of rights letter ten days later advising the insured of its continued investigation of coverage issues. On the same date that the insurer issued its reservation of rights letter, the insureds filed a separate answer to an intervention filed in con- nection with the Petition for Damages. The Court concluded that there was no evidence that the insureds’ legal representa- tion was ever compromised, that the insureds were prejudiced in any way, that the insureds relied on any representation by the insurer, that there definitely was insurance coverage for the plaintiff’s claims or that the insurer’s assertion of its coverage defense/policy exclusion was untimely. The Court noted that the insureds filed a separate answer to an intervention with knowledge of the insurer’s coverage defense as outlined in
the reservation of rights letter and that “by filing this separate answer, [the insureds] implicitly agreed that [the insurer] had reserved its coverage defense.” 117 So.3d at 199.
Even though, initially, the insurer may provide the insured with a defense against the claim, this is not an admission that the policy covers that person. W.T.A. v. Yeager, 832 So.2d 1217, 1219 (La. Ct. App. 3d 2002).
Attorney’s Fees
An insurer may be liable to the insured for attorney’s fees if
it fails to properly defend the insured under a reservation of rights. In Clemmons, the insurer initially retained one attorney to represent the insured and itself in a direct action. As time went on, the retained attorney advised the insured that a con- flict of interest might exist and that it should consider retaining separate counsel. Where coverage issues are presented, the insurer may require the use of a non-waiver agreement or reservation of rights or may bring a declaratory judgment ac- tion. In this instance, the insurer did not exercise any of these prerogatives, and failed to properly defend the insured. Thus, it was liable for the insured’s attorney’s fees incurred in defend- ing the action. Clemmons v. Zurich General Acc. & Liab. Ins. Co., 230 So. 2d 887 (La. Ct. App. 1st 1970).
Reimbursement for Defense Costs
The reservation of rights letter may provide the insurer with the right to seek reimbursement for defense costs it pays if it later establishes that those costs were incurred in defend- ing non-covered claims. The reason for allowing an insurer
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