STORY FROM: Reinsurance & Arbitration

Insolvent Insurer Not Required to Indemnify Hospitals for Legal Costs, Va. High Court Rules

RICHMOND, Va. — An insolvent insurer is not obligated to reimburse legal fees and costs incurred by a group of Kentucky hospitals in lawsuits initiated against the insurer’s receiver because the hospitals were only entitled to reimbursement for costs arising from defending a claim, not asserting a claim, the Virginia Supreme Court has ruled.

In a Nov. 22 opinion, the court found the definition of “damages” in the parties’ indemnification agreement excludes any obligation for the insurer to indemnify the hospitals for the legal fees and costs incurred in the lawsuits.

In the late 1970s and early 1980s, a group ...

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