Seventh Circuit Emphasizes Limited Scope of the Mend-the-Hold Doctrine
Building on the recent precedent established in Ryerson Inc. v. Federal Insurance Co. , the Seventh Circuit again limited the application of the mend-the-hold doctrine in the context of an insurance-coverage dispute.
The mend-the-hold doctrine, which acquired its name from a 19 th century wrestling term, prevents a defendant from changing its defense strategy in the middle of litigation. Parties, particularly policyholders, have attempted to use an expanded form of the doctrine to prevent insurers from raising defenses in coverage litigation that were not included in pre-litigation correspondence sent by the insurer.
In Amerisure Insurance Co. v. National Surety Corp., the appellant-insurers sought contribution from another insurer, Scottsdale Insurance Company (“Scottsdale”), for an underlying settlement. The district court granted Scottsdale’s motion for summary judgment and held that Scottsdale had no coverage obligations because of a cross-liability exclusion in its policy. On appeal, the appellants argued, inter alia, that the mend-the-hold doctrine prevented Scottsdale from asserting a defense based on the cross-liability exclusion because Scottsdale’s pre-trial communications did not indicate its intent to rely on the exclusion but, rather, had only mentioned different defenses.
The Seventh Circuit rejected the appellants’ argument, explaining that Indiana has not adopted the mend-the-hold doctrine. Moreover, the Court explained that the doctrine would not apply because Scottsdale’s pre-litigation correspondences indicated that the insurer reserved the right to “assert defenses regarding any of the other terms, conditions, or exclusions of this policy.” Quoting from Ryerson, the Court concluded that “[t]o require a potential defendant to commit irrevocably to defenses before he is sued would be unreasonable to the point of absurdity.”
The Court also noted that the mend-the-hold doctrine did not apply because the appellants were not surprised or prejudiced by Scottsdale’s assertion of the cross-liability exclusion. The appellants had a copy of Scottsdale’s policy and therefore should have known that Scottsdale might assert policy defenses other than those specifically mentioned in its pre-litigation correspondences.
For further information about the potential implications of this decision or any other insurance coverage related matter, please contact Eileen King Bower, Christopher White or any member of the Troutman Sanders LLP Insurance Practice Group.
© TROUTMAN SANDERS LLP. ADVERTISING MATERIAL. These materials are to inform you of developments that may affect your business and are not to be considered legal advice, nor do they create a lawyer-client relationship. Information on previous case results does not guarantee a similar future result.