Hunton Insurance Recovery Blog

A policyholder’s settlement negotiations—even without a formal proceeding like arbitration or mediation—can give rise to its insurer’s duty to defend.

The Fifth Circuit in BPX Prod. Co. v. Certain Underwriters at Lloyd's London found that because the contractor master services agreement (MSA) required the negotiations, the negotiations were not informal and were a type of alternative dispute resolution (ADR) proceeding. This case emphasizes that trade policyholders and risk management teams should give serious consideration to ADR provisions when working up construction contracts, such as ensuring that the ADR provision requires initial negotiations if the parties seek that type of alternative resolution. These provisions not only pave an avenue for dispute resolution out of court but can also serve as the impetus to trigger an insurer to defend, and indemnify, the claim.

The Fourth Circuit in APAC-Atlantic, Inc. v. Owners Insurance Co., No. 24-1969, 2026 WL 458402 (4th Cir. Feb. 18, 2026) recently endorsed broad coverage for additional insureds, interpreting “arising out of” broadly under North Carolina law to extend coverage to a repaving company under its subcontractor’s liability insurance policy. The court held that an additional insured’s liability “arising out of” a named insured’s work in an additional-insured endorsement means liability “relating to” or “causally connected to” the named insured’s operations, rather than liability defined more narrowly as “caused by” or “the fault of” the named insured.

The United States District Court for the Southern District of Texas recently rejected a claim by a group of insurance companies (“Underwriters”) against American Global Maritime Inc. for more than $500 million that the Underwriters paid the named insured under an Off-Shore Construction Risk insurance policy for losses resulting from the an alleged off-shore oil rig failure.