Connecticut Property and Casualty Insurance Law Newsletter – November 2022

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U.S. District Court – Priority of Coverage – Duty of Defence

in the Allied World Assurance Company (US), Inc. v Great Divide Insurance Companytwo insurers mutually insured a subcontractor, Precision Trenchless LLC (“Precision”). After Precision caused property damage by allegedly deficient work on a construction project, the employer and the general contractor filed a lawsuit against it. Precision required both Allied World and Great Divide to defend it in suit, and Allied World began defending it. The underlying lawsuit was subsequently settled. While this lawsuit was pending, Allied World sought a court finding that Great Divide had a co-primary duty to defend Precision and recovery of Great Divide’s share of the defense. Allied World claimed that Great Divide’s defense obligation was co-primary rather than excessive because the two policies did not insure the same risk. Great Divide claimed that its coverage exceeded Allied World’s coverage regardless of the identity of the risk, and alternatively that the policies insured the same risk. Allied World’s insurance policy assumes that its coverage is primary notwithstanding the availability of other applicable insurance, except that it shares coverage equally with another policy which is also primary under its terms. Great Divide’s insurance policy assumes that coverage is in excess of any other applicable insurance unless such other insurance specifically exceeds coverage. The Court found no contradiction between those clauses and argued that Allied World’s insurance policy provided the only primary coverage in these circumstances because, by its terms, Great Divide’s insurance policy applied only after the expiry of the coverage provided by Allied World’s insurance policy. Next, the court focused its analysis on whether the two policies covered the same risk. Allied World’s policy covered personal injury to tangible property caused by an accident but was excluded from cover for personal injury to tangible property caused by the discharge of a pollutant such as waste. Great Divide’s policy covered physical damage to tangible property resulting from an accidental release of a pollutant such as waste. In applying relevant standards to an insurer’s duty of defense, the court found that the underlying claim alleges facts that could potentially be covered by both policies, and because it triggered insurers’ comprehensive defense duties, those policies insured the same relevant risk that was Precision’s defense in the underlying action.

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