St. Paul Mercury Ins. Co. v. American Bank Holdings, Inc.

UP addressed two issues in its brief: (1) under Maryland law, an insurer must show actual prejudice in order to escape coverage for a valid claim that is reported after the policy deadline; and (2) duty to defend principles applicable to the insurer should not be applicable to the policyholder under a defense cost reimbursement policy, i.e., the insurer cannot assign the duty to defend to the policyholder, then second guess the quality of the defense when defense costs are sought later. The later is an issue of first impression in Maryland. Both of these issues, and the relevant law and the underlying public policy support a reversal of the District Court’s ruling that forfeited the policyholder’s coverage.