3rd Jun 2015

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Where a third party complaint alleges both specific and general allegations of wrong doing, the insurer must consider both in order to determine whether there is a duty to defend, i.e. whether there is a potential liability under the policy.  Where the specific allegations are not covered or are excluded, the insurer’s review does not end there.  If the general non-specific allegations allege a “wrongful act” [see § W26.04 WRONGFUL ACT [§ W26.04:1 In general]] or an “occurrence” [see § O5 OCCURRENCE [§ O5:3.1 Addition of “occurrence” as an insuring event]] there then exists both covered and non-covered claims [see § B28 BURDEN OF PROOF [§ B28:5.1 Specific allegations vs. general allegations; both alleged in the third party complaint]; § C145:1 Duty to defend “mixed action”].  Any doubt as to whether the facts establish the existence of a defense duty must be resolved in the insured’s favor.  [Isaacs v. Chartis Specialties Ins. (2014, S.D. Cal.) 12 F.Supp. 3d 1256, 1265, citing Montrose Chem. Corp. v. Superior Court (1993) 6 Cal. 4th 287, 299-300]  See § C145:3 Burden of proof on insurer to allocate defense costs; § C145:5.1 Specific allegations vs. general allegations.

Duty to investigate covered for “general” allegations

Where general allegations allege acts that may fall within the policy coverages, the insurer must prove the claim cannot fall within policy coverages.  [Isaacs v. Chartis Specialties Ins. (2014, S.D. Cal.) 12 F.Supp. 3d 1256, 1265]  See § D85 DUTY TO DEFEND [§ D85:1 In general]; § P67 POTENTIAL LIABILITY [§ P67:1.2 Facts “fairly inferable”].  Such investigation may reveal facts extrinsic to the complaint which, when discovered, reveal a possibility that the claim may be covered by the policy.  An insurer must undertake a reasonable investigation into the circumstances of the claim before denying coverage.  [Isaacs v. Chartis Specialties Ins. (2014) S.D. Cal.) 12 F.Supp. 3d 1256, 1266]  See § I80 INVESTIGATE: DUTY OF INSURER – DUTY TO DEFEND [§ I80:3.1 Failure to perform a thorough investigation of all facts].

References in bold are to Mr. Cornblum’s legal text CALIFORNIA INSURANCE LAW DICTIONARY AND DESK REFERENCE (2015), published by ThomsonReuters (1-800-344-5008).  Those with WestLaw can search using the database CAINLAWDDR.

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