The Massachusetts Supreme Court has held that an insurer’s duty to defend does not include a duty to prosecute or fund its insured’s affirmative counterclaim against a third party under an employment practices liability insurance policy. The insured manufacturer in this case was sued for wrongful termination by a former employee whom the manufacturer accused of misappropriating company funds, and intended to pursue a counterclaim to recover the money. The court found that the policy’s narrow definitions of “claim” and “defense costs” made it clear that the insurer did not contract to pursue counterclaims on behalf of its insured, even where pursuing the counterclaim appeared to be a reasonable defense strategy.
Click here to read the Case Alert.
Jun 26, 2017
Jeffrey J. Vita