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IRMI Update Quiz

An insurer contributes to a settlement under a reservation of rights and later seeks to recover that payment from its insured. According to the Delaware Superior Court's analysis of New York law in the case, when may the insurer recoup those settlement costs?

A. Whenever the insurer reserved its rights before making the payment

B. Only if the insurer can show the insured was ultimately not entitled to coverage

C. Only if the policy expressly provides a recoupment right or the insured separately agrees to it

D. Whenever the settlement was paid to avoid potential bad-faith claims

Correct Answer: C. The insurer may recoup those settlement costs only if the policy expressly provides a recoupment right or the insured separately agrees to it. Subscribers to Insurance Law Essentials can learn more about this case and what you should do in your policies.