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									 The Duty to Defend
The Duty to Indemnify

       Jeff Lynn
The States of the 9th Circuit
                     Duty to Defend
   The duty to defend entails the rendering of a
    service: the mounting and funding of a defense.
   Where there is a duty to defend, there may be
    a duty to indemnify; but where there is no
    duty to defend, there cannot be a duty to
   The duty to defend has as its purpose to avoid,
    or at least minimize, liability before liability is
   The duty to defend may arise as soon as
    damages are sought in some amount.
   The duty to defend is very broad.
     Certain Underwriters at Lloyd's of London v. Superior Court, 16 P.3d 94 (2001)
               The Duty to Defend
   Liability insurer’s duty to defend arises when
    there is potential for indemnity, and may exist
    even when coverage is in doubt and ultimately is
    not established.
      Montrose Chemical v. Admiral Ins 10 Cal.4th 645, 913 P.2d 878
   An insurer may have a duty to defend even when it
    ultimately has no obligation to indemnify, either because
    no damages are awarded in the underlying action
    against the insured or because the actual judgment is for
    damages not covered under the insurance policy.
      Delgado v. Interinsurance Exchange of Auto. Club of Southern California,
      61 Cal.Rptr.3d 826 (2007)
              Woo v Fireman’s Fund
                  164 P.3d 454, Wash., 2007, July 26, 2007
   Patient’s alleged bodily injury from practical joke played on her by
    her dentist, who was patient’s employer, and from taunting about
    patient’s potbellied pigs could have been caused by accident
    within meaning of dentist’s general liability policy, and, thus
    insurer owed duty to defend.
   Dentist’s liability for playing practical joke on patient/employee under
    anesthesia, by inserting boar tusks in mouth, photographing her,
    removing the tusk flippers, and inserting temporary partial bridges
    was conceivably within coverage of professional liability policy,
    and, thus, insurer owed duty to defend; even if the dentist’s actions
    were outside definition of practice of dentistry as diagnosis or
    treatment, the definition included ownership, maintenance, or
    operation of office for the practice of dentistry, and the joke involved
    interaction with employee, was intertwined with dental practice, and
    was integrated into and inseparable from the overall procedure.
   Professional liability insurer improperly relied on an equivocal
    interpretation of case law to give itself the benefit of the doubt in
    determining that it owed no duty to defend dentist against liability for
    playing practical joke on patient under anesthesia.
             Woo v Fireman’s Fund
                duty to defend
   A liability insurer’s duty to defend arises at the time an action
    is first brought and is based on the potential for liability.
   A liability insurer has a duty to defend when a complaint
    against the insured, construed liberally, alleges facts which
    could, if proven, impose liability upon the insured within the
    policy’s coverage.
   A liability insurer is not relieved of its duty to defend unless
    the claim alleged in the complaint is clearly not covered by the
   If a complaint is ambiguous, a court will construe it liberally in
    favor of triggering the liability insurer’s duty to defend.
   The insured must be given the benefit of the doubt if it is
    unclear from the face of the complaint that the policy does not
    provide coverage; if it unclear that the complaint does not
    contain allegations that are not covered by the policy, the
    insurer has a duty to defend.
           Woo v Fireman’s Fund
Face of the Complaint
 If it is not clear from the face of the complaint against the
  insured that the policy provides coverage, but coverage
  could potentially exist, the liability insurer must
  investigate and give the benefit of the doubt that there is
  a duty to defend.
Extrinsic Facts
 If the allegations in the complaint against the insured
  conflict with the facts known to or readily ascertainable
  by the liability insurer or if the allegations are ambiguous
  or inadequate, facts outside the complaint may be
  considered to determine duty to defend.
 The liability insurer may not rely on facts extrinsic to the
  complaint to deny the duty to defend-it may do so only to
  trigger the duty.
             Woo v Fireman’s Fund
   Reservation of Rights
       If the liability insurer is uncertain of its duty to
        defend, it may defend under a reservation of
        rights and seek a declaratory judgment that it
        has no duty to defend.
       Although the insurer must bear the expense
        of defending the insured, it may do so under a
        reservation of rights while seeking declaratory
        relief as to coverage.
           Woo v Fireman’s Fund
     Liability for Breach -Duty to Defend
   Liability insurer’s breach of duty to defend
    entitled insured to attorney fees and costs on
   In a duty to defend action, an insured is entitled
    to fees on appeal pursuant to RAP 18.1,
    because the insurer “compels the insured to
    assume the burden of legal action, to obtain the
    full benefit of his insurance contract.”
                  (Olympic Steamship v. Admiral Ins., 117 Wash.2d at 53, 811 P.2d 673)
           Woo v Fireman’s Fund
             duty to indemnify
   The liability insurer’s duty to defend is triggered
    if the insurance policy conceivably covers the
    allegations in the complaint, but the duty to
    indemnify exists only if the policy actually
    covers the insured’s liability.
   The liability insurer’s duty to indemnify hinges on
    the insured’s actual liability to the claimant and
    actual coverage under the policy.
         insurer’s duty to defend
 Liability
 arises when there is potential for
 coverage, and may exist even
 when coverage is in doubt and
 ultimately is not established.
    Montrose Chemical v. Admiral Ins 10 Cal.4th 645, 913 P.2d 878
    California Insurance Code §533
   The insurer is not liable for loss caused by willful act of
    insured is an implied exclusionary clause which must be
    read into all insurance policies.
   The insurer has the burden of proving that the loss was
    caused by willful act of insured and is excluded from
   Requires more that negligence, recklessness, or even
    the intentional doing of an act constituting ordinary
    negligence of the violation of a statute; the statutory
    exclusion is intended to preclude indemnification for
    conduct that is clearly wrongful and necessarily harmful.
   Precludes indemnification for liability arising from
    deliberate conduct that the insured expected or intended
    to cause damage.
      General Consensus

 The states of Alaska, Arizona, Hawaii,
 Idaho, Montana, Nevada, Oregon, and
 Washington all tend to follow the same
guiding principles established in California
when it comes to the duty to defend and
          the duty to indemnify.
    Construction Defect Exclusions
   “Damages to Your Work”
        Property damage due to the insured’s own work
        Precludes coverage for liability for damages to and deficiencies in the
         insured contractor’s defective work product.
   Work “by or on behalf of” Insured
        Provides insured contractor with coverage for his completed work when
         the damage occurs due to the work of a subcontractor
   Insured’s “own product”
        Does not typically apply to construction liability therefore faulty
         construction or defective materials in a building are not barred
        Applies to subcontractors
   Premises Alienated
        Denies coverage to an insured who failed to repair or to disclose defect
         prior to sale
   Contractual Liability
        Does not allow for coverage where the insured has contractually
         assumed the tort liability of another person
        except where the contract has to do with the insured’s business (the
         insured contract exception to the exclusion)

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