Duty to defend - when is it triggered?
In the recent case of , the New York appeal court considered when a duty to defend was triggered under a policy wording.
The facts
The case concerned an injury to a sub-contractor on a construction project. The sub-contractor benefitted from insurance that had been taken out with the Defendant.
The policy included cover for 鈥榣iability for bodily injury鈥aused in whole or in part by the [policyholder鈥檚] acts or omissions鈥. However, the claim against the contractor alleged violation of labor laws, but not negligence. Accordingly, insurers argued they had no duty to defend the claim as it did not satisfy the policy鈥檚 insuring clause.
Decision
The court adopted a purposive approach and held that insurers were obliged to defend the claim. In reaching that decision, the court held that the insurer鈥檚 duty to defend would be triggered if the complaint suggests a 鈥渞easonable possibility鈥 that the claims may fall within the scope of the policy. Even though the underlying complaint did not specifically allege negligence, it did suggest a reasonable possibility that negligence was a proximate cause of the sub-contractor鈥檚 injuries, thereby potentially bringing the claim within the ambit of policy.
Accordingly, the court held that insurers did have a duty to defend the contractor, despite the fact the complaint did not actually allege that the subcontractor had been negligent.
This decision confirms that the court may take a purposive approach when considering an insurer鈥檚 duty to defend, rather than strictly following the pleaded cause of action.
Contents
- The Word, November 2022
- An update on articles in previous editions of the Word
- ‘You get what you pay for’ – the meaning of ‘professional services’ in D&C policies
- ‘Final judgment’ or ‘final adjudication’ - what’s the difference?
- Atlanta adopts Plain Numbers to improve policy readability
- Date of incident or date of coverage decision – when does the cause of action commence?
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