21st Sep 2017
Defense obligation distinguished from indemnity obligation; Illustrations
The insurer’s obligation under a supplementary payment provision in a CGL policy applies “only” to those cases where the insurer actually owed a duty to defend. [Golden Eagle v. Cen-Fed (2007 148 Cal. App. 4th 976, 996, discussed in Navigators Specialty Ins. v. Moorefield Construction (2016) 6 Cal. App. 5th 1258, 1282-1283] Where the pleadings and extrinsic facts support a triable issue of fact on the duty to defend as one of the possible causes of the third party’s injuries, the duty to defend attaches. [Navigators Specialty Ins. Co. v. Moorefield Construction (2016) 6 Cal. App. 5th 1258, 1283] Where the ultimate determination of a loss is that it was caused by a noncovered occurrence, this does not mean that the insured’s lawsuit never presented any potential for policy coverage. [Navigators Specialty Ins. Co. v. Moorefield Construction (2016) 6 Cal. App. 5th 1258, 1284-1285] See § D85 DUTY TO DEFEND [§ D85:9 Indemnity and defense costs distinguished]. Accordingly, an insurer has no duty under policies to indemnify the insured for a noncovered deliberate act in knowingly installing flooring in a project which was contrary to specifications. However, an insurer in such a matter would have a duty to defend and make payments of fees and costs under the supplementary payments provision of the policy for allegations of alleged covered breach of contract allegations. [Navigators Specialty Ins. Co. v. Moorefield Construction (2016) 6 Cal. App. 5th 1258, 1291] See § B20 BREACH OF CONTRACT [§ B20:2 Ex contractu/ex delicto distinction to determine coverage, rejected] Navigators Specialty Ins. Co. v. Moorefield Construction distinguished State Farm General v. Mintarsih (2009) 175 Cal. App. 4th 274 (6 Cal. App. 5th 1258, 1285] In Mintarsih, the court held no duty to indemnify the insureds existed under the supplementary provision of the policies while finding that the right to attorney’s fees arose under a wage and hours claims statute only. [6 Cal. App. 5th 1258, 1286]
Settlement of suit; right to supplementary payment coverage for fees and costs
When litigation settles, and there is a duty to defend, the insured may recover from the insurance company the amount paid toward the settlement that represented costs under the supplementary payments provision. [Navigators Specialty Ins. Co. v. Moorefield Construction (2016) 6 Cal. App. 5th 1258, 1286-1287]
References in bold are to Mr. Cornblum’s text CALIFORNIA INSURANCE LAW DICTIONARY AND DESK REFERENCE, 2017 Edition, published by ThomsonReuters (1-800-344-5008 to order 3-Volume text).