A recent unpublished decision from California’s Second Appellate Division highlights one of the most common mistakes lawyers make when obtaining insurance coverage for the defense of a lawsuit:  accepting the insurer’s ultra-low hourly rate caps for charges incurred before the date on which the insurer actually acknowledged its defense obligation and began defending.

The case is City Arts, Inc. v. Superior Court (Travelers Property Casualty Company of America), B256132 (issued Dec. 9, 2014).  There, Travelers agreed that its obligation to defend an underlying lawsuit against City Arts was triggered no later than April 2009.  However, Travelers did not actually agree to begin reimbursing defense costs until February 2010.  (In the intervening 10 months, Travelers and City Arts exchanged a series of letters arguing about whether Travelers had a duty to defend, before Travelers finally relented in February 2010.)  Nevertheless, Travelers claimed that it could impose its hourly rate caps on all charges incurred from April 2009 forward.

Read the full blog post on Policyholder Perspective: CA Court of Appeals Confirms that Insured Need Not Accept 2860 Rate Caps For Work Done After Tender, But Before Insurer Accepts Defense