In March, a federal court in New York held that an insurer that failed to assert a late-notice defense in its reservation of rights letter waived late notice as a ground for denying coverage.
As illustrated in the decision of the U.S. District Court for the Southern District in Olin Corp. vs. Insurance Co. of North America (March 2, 2006), insurers must pay careful attention to drafting letters involving reservations of rights or risk the consequences of waiving obvious coverage defenses.
Plaintiff Olin Corp., owner of a chemical manufacturing facility in Alabama, was insured for environmental remediation and cleanup liability under a policy issued by the defendants, certain underwriters at Lloyd's of London and certain London Market Insurance Companies (collectively "the London Underwriters").
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