One Thing Is Not Another: Defining Standards for the Duty to Defend and Indemnify

By and Michael L. Golding | March 21, 2011

  • April 21, 2011 at 9:16 am
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    With all due respect, nothing the Supreme Court has been doing with the duty to defend standards is clear. If the pleadings do not foreclose the potential a covered claim may be made, then a defense is owed. The recent decisions create a new middle ground where the court finds no duty to defend, but refuses to determine indemnity because the possibility a covered claim exists is noe eliminated as in Griffin. The march to this confusion came to a head in Zurich v Nokia, a decision finding a duty to defend a cell phone class action suit that did everything it could, besides standing on its head, to disclaim it was seeking individualized damages from cell phone exposure. I would submit you cannot square this decision with Markel and Burlington.

    The court has still not addressed two key issues regarding the duty to defend: (1) how are silent pleadings treated under a strict construction rule, and (2) will extrinsic evidence ever be allowed where pleadings are silent on key coverage facts.

    In any event, the volte face of the court regarding indemnity determinations on pleadings will have untold effects on other aspects of coverage law in Texas. The promise of dec actions on indemnity prior to trial of the underlying suit, set forth in State Farm v Gandy and Griffin, was a lynchpin safety valve for carriers facing a Stowers demand while having an unresolved indemnity coverage dispute. This safety valve was the core reason why the court found the right of reimbursement unnecessary, as an obligation implied in law, in Frank’s Casing.



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