An Iowa federal court recently ruled that an insurer must pay its policyholder’s defense costs from the date of installation of the allegedly faulty product, even though the underlying suits failed to allege when damage purportedly occurred. The ruling opens the door under each of the policyholder’s successive liability policies from 2000 to 2008, allowing the policyholder to recover millions of dollars in defense costs.
The policyholder sought summary judgment concerning the date(s) on which the insurer’s defense obligation was triggered by fourteen of the fifteen claims asserted against it. The policyholder argued that the duty attached from the moment property damage potentially occurred, meaning the time when the underlying claimant installed or potentially could have installed the windows at issue in the underlying claims. The policyholder cited to the following evidence to support its claim: actual dates of installation (where available), dates of delivery, purchase or manufacture of the windows; and policy period referenced in the insurer’s claims notes as being potentially implicated by the claim.
The court ruled in favor of the policyholder. The court noted that while the underlying complaint contained little information regarding the time period in which damage to the windows was alleged to have occurred, the complaints contained allegations about when the defective products were sold or installed. Consequently, the court held that the underlying complaints’ “allegations, combined with the additional facts in the record regarding the sale, delivery, and installation of windows, [were sufficient] to establish that the [claims] had been ‘arguably or potentially’ brought within the coverage of the particular policy periods.”
The decision is a helpful reminder for policyholders and other insureds, alike, of the breadth of the defense obligation that resides in most standard-form general liability insurance policies. The decision also underscores the value of secondary evidence when faced with unclear or ambiguous facts and policy language. Here, despite lacking evidence of the date when damage occurred, secondary evidence of the date the faulty product was installed was sufficient to trigger the insurer’s defense obligations, thus effectively shifting the burden to the insurer to show when damage actually or potentially occurred to escape its duty to reimburse defense costs. The case is Pella Corp., et al. v. Liberty Mut. Ins. Co., No. 4:11-cv-00273-JEG (S.D. Iowa filed Jan. 16, 2018). A copy of the decision can be found here.