Part 3 of 8
A simple tender letter can show up any time during the claim process, but it often appears long before a lawsuit is filed. Such a letter can cite contracts, insurance certificates and possibly even endorsements that provide AI coverage. They will demand defense and indemnity or additional insured status often before any real facts have been established.
In reality, a tender letter is often just a “position letter”. It states what the other party believes to be true. It does not prove coverage. It does not establish contractual obligation. It does not resolve who actually owes a defense. Under the AVOID Act, this distinction is more important than it used to be.
How Tenders Functioned Before Litigation
Prior to a lawsuit, the matter of a tender letter was an issue that lived in an evolving, flexible space. They would often be fired off as a matter of procedure once a couple of documents were uploaded to the file. Accoridngly, claim departments would not regard them heavily, and they would place them in the claim file while they went about their investigation in a normal fashion. There were no commitments made to coverage or defense and indemnity.
Sometimes though, a gratuitous defense would be offered under the assumption that everything will be sorted out later when the facts came in.
Now that has changed.
What a Tender Letter Actually Does
A tender letter performs three limited functions.
• It provides notice.
• It preserves the sender’s position.
• It signals how risk transfer may be argued later.
That is all.
It does not confirm that a contract exists nor does it establish Additional Insured status.
Treating it as anything more is an analytical shortcut.
What Changes Once Litigation Begins
Once a lawsuit is filed, everything accelerates.
The AVOID Act applies only after litigation is underway. It governs third-party practice and impleader deadlines. Tender letters themselves have no procedural role in that process.
But the file that enters litigation already contains assumptions.
Defense may already be extended. Positions may already be taken. Other parties may already be relying on those positions when deciding how to plead and whom to bring into the case.
Under compressed post-suit deadlines, there is far less time to revisit those assumptions.
Why Early Acceptance Becomes Risky
Accepting a tender early does not automatically create coverage.
What it can create is reliance.
Once defense is extended, counsel appears. Strategy forms. Billing begins. Other parties adjust their litigation posture around that defense being in place.
If that defense is later withdrawn after impleader deadlines have passed, the issue is no longer just coverage. It becomes prejudice, reliance, and procedural consequence.
That is the real risk the AVOID Act exposes.
Allegation Versus Obligation
Tender letters assert conclusions. Coverage analysis determines obligation.
An allegation of contractual defense does not make it enforceable. An assertion of Additional Insured status does not confirm endorsement language. A demand does not establish duty.
Under the AVOID Act, claims teams no longer have the luxury of letting those distinctions sit unresolved until later.
The Disciplined Approach Going Forward
Tender letters should be treated as starting points, not commitments.
Coverage must be confirmed under the policy. Contractual obligations must be confirmed under the contract. Defense decisions should be tied to identified authority and documented clearly before litigation deadlines arrive.
That work happens earlier now, whether claims teams want it to or not.
The Takeaway
Tender letters have never proven coverage.
What has changed is timing.
Under the AVOID Act, assumptions made during pre-suit tender handling are carried directly into fast-moving litigation. Claims teams that recognize this will retain flexibility. Those that do not will discover that early shortcuts become hard positions once the clock starts.
Thank you for spending time with this article. Tender letters play an important role, but treating them as proof creates unnecessary exposure. In the next article, we will focus on defense costs and how the AVOID Act accelerates erosion risk when defense obligations are misclassified early.
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