Does the CGL Insurer Have to Defend Before There is a Lawsuit? It Can Easily Be a Six Figure Question
Although other policies (EPLI, D&O, E&O) have expanded upon the types of proceedings they will defend, the insurance industry has stood firm under CGL polices and defend only civil “suits.” While the policy itself states that the duty to defend is not triggered until presentation of a “suit,” in Massachusetts and elsewhere courts have expanded upon this trigger of defense to include when the insured has been confronted with coercive governmental action, such as an EPA letter asserting environmental liability. See, e.g., Hazen Paper Co. v. U.S. Fidelity & Guaranty Co., 407 Mass. 689 (1989). These decisions have led sophisticated insureds to push the envelope and seek defense costs coverage whenever a demand comes in.
One such case is Bay State Gas Co. v. Robert J. Devereaux Corp. (2012 WL 5378084 (Mass. Super.)). As a result of an explosion apparently caused by one of its contractors, Bay State was confronted by “information requests” from the DPU and later the Attorney General’s office. The CGL insurer was put on notice. Substantial fees were incurred responding to the agencies before the personal injury cases were filed a couple of years later. Bay State sought to recover the pre-lawsuit fees. Judge Leibensperger of the Superior Court rejected the attempt. He found the agency information requests did not trigger a duty to defend because their purpose “was to gather factual information” and did not allege “that Bay State was, or could be, liable for damages.” The court also would not allow Bay State to recover costs incurred to defend the personal injury claims before the lawsuits were actually filed. This case is not likely to be the last word on these issues.
Steven L. Schreckinger
Posted In: Duty to Defend