Background
Plaintiffs appealed a district court’s grant of judgment on the pleadings in favor of the defendant regarding an alleged breach of an Employment Practices Liability Insurance Policy. The dispute centered on whether the insurer was required to wait for the insured to exhaust the self-insured retention amount before taking control of the defense.
The court’s reasoning
The court found the policy language unambiguous, granting the insurer the right and duty to defend any claim. The court held that adding a restriction on exercising that right before the insured exhausts the self-insured retention would be improper. Furthermore, the court noted that the policy expressly makes coverage contingent on the insured’s payment of the self-insured retention, consistent with the primary purpose of such retention to allow the insured to contain insurance costs.
Because this language is not ambiguous, it would be improper to add a term about which this section is silent.
What it means going forward
Insurers may exercise their right to defend claims prior to the exhaustion of the self-insured retention amount, and the insured remains obligated to pay the retention regardless of when the insurer asserts its right to defend.