Product Update

Duty To Defend and Breach of Contract Discussions Updated in Commercial Liability Insurance

This Commercial Liability Insurance release brings you revised discussions of duty to defend under a commercial general liability (CGL) policy and breach of contract issues in construction defect claims.

We have undertaken a major revision and update explaining an insurer's duty to defend under a standard CGL policy and related issues. The revision reflects the current state of various jurisdictions's laws addressing how an insurer's duty to defend a covered claim is triggered, when the duty to defend ends, and circumstances that may give the insured a right to independent counsel. The expanded discussion analyzes recent developments in insurers' right to recoup defense costs for noncovered claims (or the noncovered portion of a claim) and explains what insureds should know about insurers' use of reservation of rights letters.

CGL claims for defective construction are sometimes resisted by insurers on the basis that such liability derives from the assumption of liability in a contract—the insured's obligation to perform the project in a workmanlike manner, for example—and thus is ineligible for coverage because of the contractual liability exclusion. Courts have taken various approaches to this argument, and our analysis of the CGL contractual liability exclusion is updated in this release to report on some recent case law that distinguishes tort liability from breach of contract.