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.