Author - cgdlaw-blog

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An Insurer Cannot Rely Satisfaction of a SIR as a Prerequisite to Defend its Insured Unless the Policy Language Expressly Sets Forth in Clear and Unambiguous Terms that the Defense is Conditional on Satisfaction of the SIR

An Insurer Cannot Rely Satisfaction of a SIR as a Prerequisite to Defend its Insured Unless the Policy Language Expressly Sets Forth in Clear and Unambiguous Terms that the Defense is Conditional on Satisfaction of the SIR

American Safety Indemnity Co. v. Admiral Ins. Co. 2013 WL 5397890 (Cal.App.4 Dist.)

By: Jon A. Turigliatto and David A. Napper
October 15, 2013

The Fourth District Court of Appeal held that a self-insured retention (“SIR”) in a commercial general liability policy does not necessarily excuse the insurer from providing a defense to an insured that had not first satisfied the SIR through payment of defense costs. The Court once again applied the well-establish principle that any limitation on the coverage provided by a liability insurance policy must be express and consistent with the reasonable expectations of the insured.

Following a landslide alleged to have resulted from grading deficiencies, homeowners sued several defendants, including the developer and the grading contractor. The developer was insured by Admiral Insurance Company (“Admiral”) and the grader was insured by American Safety Indemnity Company (“ASIC”). The developer was named as an additional insured on the ASIC policy and tendered its defense to ASIC. ASIC initially declined to defend. But after the developer sued for bad faith, ASIC agreed to defend the developer and its related entities (collectively “Developer”).

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