[The following is an updated version of the July 2012 edition of Resolution Strategies]

In multi-party disputes, a tender of defense can be an instant game-changer when it comes to assessing risk and developing a cost-effective resolution strategy. All too often, parties who may be contractually obligated to defend and indemnify another party fail to recognize that their duty to defend may arise immediately upon receipt of a proper tender and may exist whether or not there is a later finding that indemnity is owed.

Given the scope of the duty to defend, the decision by one party to deny a proper tender can have repercussions that impact the ability of other parties to negotiate an early resolution of the dispute. Moreover, rejecting a party’s tender and failing to take into consideration the potential liability for that party’s defense costs can further complicate efforts to negotiate a resolution down the road.

When confronted with claims involving multiple defendants and one or more tenders of defense, the best strategy — absent a decision to accept the tender or tenders — will usually be for the various defendants to submit their disputes with one another to mediation as early as possible, temporarily leaving plaintiff’s claims on the sidelines. Once the defendants have resolved the issues between them, it will almost always be easier to resolve the claims asserted by plaintiff.

Even if defendants are unable to resolve their differences, early mediation may result in an agreement by defendants that it will serve their collective interests — and substantially reduce the costs of defense — to jointly negotiate a resolution with plaintiff and thereafter submit their remaining disputes to binding arbitration or trial.

The denial of a proper tender can be a costly mistake, one which often results in costs of defense that far exceed — sometimes by several multiples — the actual value of the underlying claim. Therefore, every tender of defense should be approached with tender loving care.

As always, it would be my pleasure to assist you and your clients in the dispute resolution process. Please don’t hesitate to contact me if I can be of service.

Best regards,

Floyd J. Siegal

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