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In a recent decision, the Indiana Supreme Court held that held that an insurer’s duty to defend “does not arise” until the policyholder provides notice of a claim or suit. It held the insurer had no duty to reimburse pre-notice defense costs. The Dreaded decisions is limited to pre-tender defense costs and discusses the test whereby, under most circumstances, an insurer is required to show actual prejudice in order to disclaim coverage for indemnity costs. The Supreme Court also was careful to distinguish the facts of Dreaded from circumstances where late notice was “legally excused,” leaving open the argument that circumstances such as the loss of policies or an insurers’ practice of denying certain kinds of claims regardless of when notice is provided will excuse late notice and allow recovery of pre-notice defense costs.
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