Second Circuit Court Of Appeals Rules That An Employer Must Notify Its Insurer Of A Potential Claim Upon Receiving A Demand Letter From Counsel
The Second Circuit's ruling in Westrec Marina Management v. Arrowood Indemnity Co. is a warning to employers to report potential claims to their insurance carrier as soon as possible or face denial of coverage. In Westrec, an employee filed a charge of discrimination against Westrec with the California Department of Fair Employment and Housing (DFEH) and requested an immediate right to sue letter. Subsequently, her attorney sent a demand letter to Westrec asserting claims and seeking possible early settlement prior to filing a lawsuit. At the time of the letter, Westrec failed to inform its insurer, Arrowood, of the claim. The employee later filed a civil action, and when Westrec tendered the claim, Arrowood denied coverage.
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