GOOD OLE DUTY TO DEFEND

shutterstock_513564982The good ole duty to defend. Certainly, a duty that should not be overlooked.

 

A commercial general liability insurer has two duties to its insured when it comes to third-party claims: 1) the duty to defend its insured and 2) the duty to indemnify its insured.

 

The insurer’s duty to defend its insured will always be broader than its duty to indemnify because this duty is triggered by the allegations in the lawsuit.  (For this precise reason, insurers will oftentimes defend their insured under a reservation of rights.)  The duty to defend is a very important duty as it is the first duty that typically comes into play when a third-party claim / action is initiated against the insured.  Getting the insurer on board to provide a defense is an initial focus. One that cannot be neglected or overlooked.

 

If an insurer denies or refuses to defend its insured, this means the insurer is denying coverage outright.  In other words, the insurer is coming out of the gate denying the duty to indemnify the insured and, as such, denying the duty to defend.  There is no reservation of rights because the insurer is not going to provide a defense based on its denial of coverage.  When this happens, it is imperative that the insured consult with counsel.  Not later or tomorrow or down the road.   But, now!  Immediately.  At a minimum, an insured wants to ensure that its insurer is picking-up the broader duty to defend and needs to make sure its rights are protected and preserved.

 

In Mid-Continent Casualty Company v. Flora-Tech PlantScapes, Inc., 42 Fla. L. Weekly D1649a (Fla. 3d DCA 2017), a general contractor initiated a third-party claim against a landscaper in a personal injury action.  (It is uncertain whether the landscaper was hired by the general contractor or the developer.)  The  landscaper’s commercial general liability insurer denied coverage and, therefore, refused to defend the insured in the lawsuit. As a result, the landscaper initiated a fourth-party claim against its own insurer for coverage seeking a declaration that its insurer had a duty to defend it in the lawsuit and indemnify it for the third-party claims being asserted against it.   Both the landscaper and its insurer filed motions for summary judgment and the trial court declared that the insurer had a duty to defend its insured, but that it was not making a determination as to the insurer’s duty to indemnify.  From the insured-landscaper’s standpoint, this likely was fine because the landscaper was initially looking for a declaration that its insurer had a duty to provide it a defense in the personal injury action.

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

ADDITIONAL INSURED OBLIGATIONS AND THE UNDERLYING LAWSUIT

images-1As a general contractor, you understand the importance of being named an additional insured under your subcontractors’ commercial general liability (CGL) policies.   Not only do you want your subcontract to express that a subcontractor’s CGL policy is primary and noncontributory to your policy, but you want it to express that the subcontractor must identify you as an additional insured for ongoing and completed operations.  Even with this language, you want the subcontractor to provide you with their additional insured endorsement and, preferably, a primary and noncontributory endorsement.    These additional insured obligations are important to any general contractor that has been sued in a construction defect / property damage lawsuit.

 

In the recent decision in Core Construction Services Southeast, Inc. v. Crum & Forster Ins. Co., 2016 WL 5403578 (11th Cir. 2016), a general contractor built a residential development.  The general contractor required its roofing subcontractor to identify it as an additional insured under the roofer’s CGL policy.   The general contractor was sued with the lawsuit asserting that the roofs were installed incorrectly.  The general contractor tendered the defense of the claim to the roofer’s CGL insurer and the insurer refused to provide the defense because there was no “property damage” within the definition of the CGL policy (“physical injury to tangible property…”).    The general contractor then filed a lawsuit against the subcontractor’s insurer arguing that the insurer was obligated to defend and indemnify it since the general contractor was an additional insured under the subcontractor’s CGL policy.  The trial court, and as affirmed by the Eleventh Circuit Court of Appeal, held that the insurer owed no duty to defend or indemnity the general contractor because there was NO asserted property damage within the meaning of the policyIf there was no property damage then there was no obligation for the roofing subcontractor’s insurer to defend the general contractor as an additional insured under the subcontractor’s CGL policy. 

 

The underlying lawsuit only claimed that the roofs had been damaged but did NOT claim that the defective roofs had caused damage to other property (other components of the building).  The omission of this assertion was important because the complaint was not pled to trigger insurance duties, such as additional insured obligations, since the cost to repair or replace the damaged roof would not be covered by the subcontractor’s CGL insurer.  Rather, costs to replace or repair damage caused by the subcontractor’s defective roofing installation would be covered; however, such damage was not pled in the underlying complaint.   Remember, the insurer’s duty to defend is only triggered based on allegations in the underlying complaint so without such allegations, there is no duty

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

CONSTRUCTION DEFECT INDEMNITY OBLIGATIONS – COVERED VS. NON-COVERED CGL CLAIMS

If you are a contractor or subcontractor and a construction defect claim is asserted against you, then you have tendered such claim to your commercial general liability (CGL) insurer.  No doubt about it.  In doing so, you have wondered whether your CGL insurer will indemnify you for the damages asserted against you by the third-party.  You have wondered whether the damages asserted against you are covered by your CGL policy.   If you have not wondered and asked these questions, then you should!  Below is a portion of a presentation I recently put on regarding construction defect indemnity obligations under CGL policies and, particularly, covered claims versus non-covered claims.  

 

Download (PDF, 195KB)

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

BE COGNIZANT OF THE POLLUTION EXCLUSION IN YOUR CGL POLICY


images-2Be cognizant of the pollution exclusion in your commercial general liability (CGL) policy. 

 

The non-construction decision in Evanston Insurance Co. v. Haven South Beach, LLC, 2015 WL 9459979 (S.D.Fla. 2015) illustrates the affect of the pollution exclusion.

 

In this case, the plaintiff was at a catered event and suffered injuries consuming a liquid nitrogen infused alcoholic beverage.  The plaintiff sued the vendor.   The vendor’s CGL policy contained the pollution exclusion and further defined pollutants as follows:

 

f. Pollution

(1) “Bodily injury” or “property damage” which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants” at any time.

 ***

 “Pollutants” mean any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditions or reclaimed.

 

The vendor’s CGL insurer argued that the liquid nitrogen constituted a pollutant; thus, there was no coverage under the vendor’s policy for plaintiff’s injuries.  The Southern District Court of Florida agreed. The Court held that liquid nitrogen is an irritant (a substance causing irritation) falling into the definition of a pollutant.  The Court further held that the irritant liquid nitrogen was discharged by the vendor into the plaintiff’s alcoholic beverage falling into the pollution exclusion, i.e., injury or damage which would not have occurred but for the actual discharge of a pollutant / irritant.

 

If you are working with products that could potentially fall within the definition of a pollutant and the pollution exclusion within your CGL policy, consider procuring pollution liability insurance to cover you for damages / injuries caused by that product.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.