Triggering the CGL Insurer’s Duty to Defend

Insureds (such as contractors, subcontractors, and suppliers, etc.) that have CGL insurance need to know what triggers the CGL insurer’s duty to defend the insured. Not only do the insureds need to know this, but it is prudent for the claimant to know this too since a claimant’s objective should always be to maximize insurance.

A liability insurer, such as a CGL insurer, has a duty to defend its insured from third-party claims based on the allegations in the complaint against the insured. If the allegations in the complaint potentially fall within the policy’s coverage, the insurer needs to provide a defense to its insured.

The insurer’s duty to defend its insured is broader than its duty to indemnify the insured for the claim. But, defense costs in a construction defect lawsuit are costly, so it is imperative that parties ensure that their insurer is defending them in the lawsuit based on allegations in the complaint that potentially trigger coverage. Moreover, if you are a claimant, it only serves in your interest by including allegations that potentially trigger coverage so that the insurer is involved in the lawsuit.

Let’s put this in application. A homeowner contacted a service mechanical contractor to fix the air conditioning system. The mechanical contractor installed a new compressor. However, this did not fix the homeowner’s problem. The owner sued claiming the mechanical contractor failed to properly inspect the air conditioning system which resulted in an unnecessary repair that did not work.  However, no resulting damage or injury was alleged.  The mechanical contractor tendered the suit to its CGL carrier but the CGL denied a defense because the allegations in the lawsuit did not potentially trigger CGL coverage. There were no allegations that the mechanical contractor’s work resulted in bodily injury or property damage. CGL insurance is not designed to cover the insured’s defective work, but designed to cover damage or injury resulting from the insured’s work. So, without allegations potentially triggering CGL coverage, it was easy for the insurer to deny a defense.

If you are involved in a construction defect lawsuit, it is important to consult with counsel. This way the claim can be tendered to your CGL carrier and if your CGL carrier refuses to provide you a defense, you can strategize with your counsel as to the best course of 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.

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