Beckwith Machinery Company v. Travelers Indemnity Company
United States District Court for the Western District of Pennsylvania
638 F. Supp. 1179 (1986)
Beckwith Machinery Company (plaintiff) sold Caterpillar tractors to Trumbull Corporation that broke down and stalled a construction project; Trumbull sued Beckwith and Caterpillar for damages, including punitive damages. Beckwith's insurer, Travelers Indemnity Company (defendant), assumed Beckwith's defense in the Trumbull suit, though it separately declined to cover the punitive-damages claims. Thirteen months after the suit began, and after an internal memo noted Travelers might be estopped from withdrawing, Travelers denied coverage entirely and withdrew its defense, later offering to resume defending only if Beckwith waived any prejudice claims against it. Beckwith hired its own counsel, settled the Trumbull suit for $100,000, and sued Travelers for breach of contract. Both sides moved for summary judgment.
Whether an insurer that assumes an insured's defense without notifying the insured that it is reserving its rights is later estopped from denying coverage on the ground the claim is not covered.