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Last Reviewed / Modified On 18 Nov 2021.


Construction Claims

Limitations & Repose Periods

Statute of Limitations

Generally, all construction related claims are governed by Arkansas Code Annotated § 16-56-111 “Design, Planning, Supervision, or Observation of Construction, Repair, Etc. Actions for Property Damage, Personal Injury, or Wrongful Death” Arkansas has a five-year statute of limitation for any cause of action based on a written contract, duty or right. A.C.A. § 16-56-111. Actions based on oral contracts or torts must be commenced within three years after the cause of action accrues. A.C.A. § 16-56-105. All other actions not specifically addressed in other statutes are subject to a five-year statute of limitation. A.C.A. § 16-56-115.

  1. Breach of Contract.
  2. Negligence.
  3. Breach of Warranty.
  4. Misrepresentation and Fraud.
  5. Strict Liability Claims.
  6. Indemnity Claims
    1. Express Indemnity.
    2. Implied Indemnity.

    Triggering dates for the Statute of Limitations

    Under the statutes, the limitation period begins to run when the cause of action accrues. A cause of action accrues when it becomes obvious that a permanent injury has been suffered.

Statute of Repose

A.C.A § 16-56-112 details that actions based on contract to recover damages must be brought within five (5) years after the date of substantial completion and actions in tort or contract to recover damages for personal injury or wrongful death cases; if the injury occurred during the fourth year following substantial completion of an improvement, an action intort or contract to recover damages for the injury may be brought within one year after the date the injury occurred, but in no vent more than five (5) years after the date of substantial completion.

The statute specifically states that "[n]nothing in this section shall be construed as extending the period prescribed by the laws of this state for the bringing of any cause of action, nor shall the parties to any contract for construction extend the above prescribed limitations by agreement or otherwise." A.C.A. § 16-56- 112(f). The courts have construed this statute as a statute of repose. Curry v. Thornsberry, 128 S.W.2d 438, 441 (Ark. 2003).

Therefore, under § 16-56-112(a), there is a maximum five-year period within which an injured party can sue a person who deficiently constructs or repairs an improvement to real property, which period commences after substantial completion of the improvement; but, in brining such a suit, the injured party must still bring the action within the statute of limitations for that type of cause of action. East Poinsett County School Dist. No. 14 v. Union Std. Ins. Co., 800S.W.2d 415, 417 (Ark. 1990).

Right to Repair Laws and/or Pre-Suit Statutory Procedures

Arkansas does not provide for a right to cure

Indemnity and Contribution

  1. Indemnity
  2. An action for indemnity arising from an agreement is governed by the same statute of limitations as any other action on a written contract: five (5) years. Ray & Sons Masonry Contractors, Inc. v. U.S. Fidelity & Guar. Co., 353 Ark. 201, 216, 114 S.W.3d 189, 198 (2003). However, if a potential claim for indemnity is based on an unwritten contract, equitable indemnity, or a right incidental to the written contract, a three-year statute of limitation applies. See ARK. CODE ANN. § 16-56-105(1) & (3) (stating unwritten or implied contracts and actions “founded on any contract or liability, express or implied” are govern by three-year statute of limitations); Larson Mach., Inc. v. Wallace, 268 Ark. 192, 213, 600 S.W.2d 1, 12 (“The basis for the right to indemnity in a case where there is no express contract therefore is liability upon an implied contract or quasi-contract.”).

  3. Contribution
  4. Contribution on the other hand requires that each tortfeasor pay his proportionate share of the total damages. In contrast, indemnity shifts the entire loss from one tortfeasor to another party who should instead bear the entire loss. Missouri Pac. R. Co. v. Star City Gravel Co., 452 F. Supp. 480, 482 (E.D. Ark. 1978).

    Certificate of Merit Experts

    Several states are successfully curbing the number of baseless claims brought against design professionals by placing the onus of responsibility for screening out groundless suits on the plaintiff. A few states have adopted "certificate of merit" laws, which require the plaintiff to consult with a third-party design professional to review the facts of the claim before moving it forward. The plaintiff must then file with the court a certificate from the third-party design professional declaring that, based upon their review of the allegations, the third-party design professional believes that there is a reasonable basis for commencement of the action.

    It does not appear that the State of Arkansas has such a requirement in Construction lawsuit.

    Economic Loss Doctrine

    Understanding the Economic Loss Doctrine is critical for construction professionals. The Economic Loss doctrine is widely misunderstood and often misapplied. The premise of the Doctrine is that a party cannot recover purely economic losses in tort action. This doctrine is a judicially created doctrine that arose out of products liability claims. The premise of the Doctrine is that a Plaintiff cannot recover in a tort action such as negligence. Unlike many states, Arkansas does not follow the economic loss rule, so parties can pursue a case even if the only damage that occurred was to the product itself

    Contractor Licensing Requirements

    To become a general contractor in Arkansas, you’ll need to satisfy specific requirements set forth by the Arkansas Contractors Licensing Board. According to Arkansas State Licensing law, a “contactor” means any person or organization who submits a bid to construct or demolish, when the cost of the project is over $50,000. When applying for a contractor’s license in Arkansas, you’ll have to satisfy these requirements:

    1. Complete your application: Depending on the projected sizes of your projects, you’ll have to decide which application to complete:
      1. Restricted Commercial License: These licenses are for commercial projects that are less than $750,000 including, but not limited to, labor and materials.
      2. Commercial License: These licenses are good for commercial projects of any size.

    2. Appropriate business style affidavit and affidavit regarding bidding: This is must be signed and notarized within the last 90 days.
    3. Filing Fee. $100.00 non-refundable filing fee made payable to the Contractors Licensing Board.
    4. Three written references. These cannot be from a supplier or banker unless they observed and can describe your work. The individuals giving the references must complete these forms themselves, and references must not be more than 90 days old.
    5. Copy of Arkansas Business and Law passing test score. Licenses can be approved but not released without a passing test score.
    6. Contractor’s Bond: Licenses can be approved but not released until a fully executed Contractor’s Bond in the amount of $10,000 is filed with the board. You can obtain contractor bonds from bonding companies or through some insurance providers.
    7. An Independent CPA reports.

      1. Those applying for a Restricted License must submit a compiled report, including:
        1. Report letter from an Independent CPA
        2. Balance sheet prepared in accordance with GAAP or on an Income Tax Basis (Accrual Method)
        3. Footnotes not required

      2. Those applying for a Contractor License must submit a reviewed or audited report, including:
        1. Reviewed or Audited opinion letter from an Independent CPA
        2. Balance sheet prepared in accordance with GAAP or on an Income Tax Basis (Accrual Method)
        3. All footnotes to the balance sheet.

    Arkansas also has a variety of planning, zoning, and construction permits that may be required before the construction project can begin. The most common licenses and permits may need may include:

    1. Alarm permit.
    2. Building permit.
    3. Business license and/or tax permit.
    4. Health permit.
    5. Occupational permit.
    6. Signage permit.
    7. Zoning permit.

    Additionally, all contractors wishing to do business in the State of Arkansas must register their business as a DBA or incorporated body such as a corporation, limited liability company, or partnership, with the Arkansas Secretary of Stat. Business and independent contractors must have liability insurance and the appropriate bonds to commence work or bid on projects.

    Common Law & Statutory Claims

    Common Law Claims:

    Breach of Contract:

    The recognizable elements for a breach of contract claim are: 1) prove the existence of a contract, 2) prove that you performed your obligation or that you have a legitimate reason for not performing, 3) prove the other party failed to perform their part of the contract, and 4) prove that other party’s failure to performed caused damages.

    A contract is an agreement offered by one party and accepted by another. Contracts are almost always written documents in Arkansas, but it is not impossible to have an entirely oral contract. When a contract is not fulfilled by one or more parties, there is a Breach of Contract. Parties sometimes choose not to fulfill their contractual obligations, and sometimes during business, it can be impossible to do so. What happens after a breach of contract depends on the situation. Usually, the party who breached the contract is liable for damages the breach caused and bringing the matter to court is sometimes needed to resolve this issue.

    Under Arkansas law, actual damage caused by the breach is not an essential element of a claim for breach of contract because a plaintiff is entitled to recover nominal damages in the absence of proof of actual damages. See Crumpacker v. Gary Reed Constr., Inc., 2010 Ark. App. 179, at 3 (“proof of causation is not an element of a claim for breach of contract or breach of implied warranty of habitability”).

    “The remedies for breach of a construction contract depend upon who is the breaching party and when the breach occurs in relation to the construction.” Brill, Ark. Law of Damages (5th ed.), § 17-3. If the contractor is in breach, the owner may be entitled to rescission and restitution for any payments made on the contract. Id.; see also Economy Swimming Pool Co. v. Freeling, 236 Ark. 888, 370 S.W.2d 438 (Ark. 1963). When a purchaser is in breach, and has prevented a builder from completing the project, the builder has two options; sue on the contract or seek recovery on a theory of quantum meriut. Brill, Ark. Law of Damages (5th ed.), § 17-3. If he or she chooses to sue on the contract, the recovery is the contract price less the amount saved by not completing the project. Id. A contract for residential construction which includes an express warranty detailing standard of workmanship will exclude any implied warranty on that subject. Id.; Carter v. Quick, 263 Ark. 202, 563 S.W.2d 461 (Ark. 1978).


    An action for negligence in construction can arise when there is a deficiency in the design, planning, or supervision of a construction project. A cause of action may allege negligent supervision, negligent hiring, or negligent construction. Daniels v. Quick, 270 Ark. 528, 606 S.W.2d 81 (Ark. App. 1980).

    There is a four (4) year statute of limitation on filing any such action involving personal injury or wrongful death. Ark. Code Ann. § 16-56-112(b). Regarding general tort liability, Arkansas courts have held that the foreseeability and negligence rules applicable in products liability cases should be controlling in an owner-contractor situation, with considerations such as owner inspection and acceptance, the time between construction and injury and other intervening factors considered in evaluating the question of negligence. Suneson v. Holloway Const. Co., 992 S. W. 2d 79 (1999).

    Professional malpractice liability for design and construction professionals is not addressed directly in the Arkansas Statutes, but rather arises under general negligence and intentional tort theories. Negligence is virtually never the sole cause of action in a construction defect case but is coupled with breach of contract and/or breach of warranty claims. Dobie v. Rogers, 339 Ark. 242, 5 S.W.3d 30 (Ark. 1999) (asserting claims of negligence, breach of implied warranties, constructive fraud, and misrepresentation); O’Mara v. Dykema, 328 Ark. 310, 942 S.W.2d 854 (Ark. 1997) (asserting claims of misrepresentation, negligence, strict liability, and breach of implied warranties)        

    Breach of Warranty:

    The breach of warranty can be based on an express warranty contained in the contract between the plaintiff and the general contractor, and/or warranties implied by law.

    Arkansas first recognized an implied warranty in contract between a builder-vendor of a new house, and the first purchaser, in 1970. Warak v. Stewart, 247 Ark. 1093, 449 S.W.2d 922 (Ark. 1970). The court later extended the implied warranty in favor of subsequent purchasers for a reasonable length of time, where there is no substantial change in the condition of the building from the original sale. Blagg v. Fred Hunt Co., Inc., 272 Ark. 185, 612 S.W.2d 321 (Ark. 1981).

    However, the law limits this implied warranty "to latent defects which are not discoverable by subsequent purchasers upon reasonable inspection, and which become manifest only after the purchase." Blagg, 272 Ark. at 187, 612 S.W.2d at 322. Further, Arkansas courts have held that the implied warranty of fitness applies when a contractor uses plans furnished by the purchaser to construct a dwelling and when the contractor uses his or her own plans to construct a dwelling then offered for sale to the public. Daniel v. Quick, 270 Ark. 528, 606 S.W.2d 81 (Ark. App. 1980).

    The implied warranty does not rest upon an agreement but arises by operation of law and is intended to hold the builder-vendor to a standard of fairness. Id. at 328, 45 S.W.3d at 839 (citing O’Mara v. Dykema, 328 Ark. 310, 942 S.W.2d 854 (Ark. 1997)). However, implied warranties may be excluded when the circumstances surrounding the transaction are in themselves sufficient to call the buyer’s attention to the fact that no implied warranties are made or that a certain implied warranty is excluded. Id.; see Carter v. Quick, 263 Ark. 202, 563 S.W.2d 461 (Ark. 1978).

    In Carter v. Quick, 263 Ark. 202, 563 S.W.2d 461 (Ark. 1978), the Arkansas Supreme Court stated that "[a]though we have no cases involving the effect of an express warranty upon an implied warranty in building contracts, we conclude that implied warranties are not applicable when there is an express warranty . . . [on the subject of an asserted implied warranty]." Carter, 263 Ark. at 205-206, 563 S.W.2d at 463. However, the Arkansas Supreme Court later revisited Carter v. Quick in its opinion in Wingfield v. Page, 278 Ark. 276, 644 S.W.2d 940 (Ark. 1983). In Wingfield the court, noting the above-stated rule of Carter, stated that "[a]assuming the implied warranty of habitability could be properly disclaimed, issues of the disclaimer's conspicuousness, detail, and reasonableness would merit our consideration.

    Misrepresentation and Fraud:

    There are five elements to the tort of fraud, misrepresentation, or deceit; 1) a false representation of material fact; 2) knowledge that the representation is false, or that there is insufficient evidence upon which to make the representation; 3) intent to induce action or inaction in reliance on the representation; 4) justified reliance on the representation; and 5) damage suffered because of the reliance. Rosser v. Columbia Mutual Ins. Co., 55 Ark. App. 77, 928 S.W.2d 813, 815 (Ark. App. 1996) (citing Wheeler Motor Co. v. Roth, 315 Ark. 318, 867 S.W.2d 446 (Ark. 1993)). Punitive damages are available for a successful cause of action based on misrepresentation or fraud. Brill, Ark. Law of Damages (5th ed.), § 9-2.

    If damage occurs because of deficiency in construction, and the deficiency was fraudulently concealed, the statutory limitation periods are not applicable. Ark. Code Ann. § 16-56-112(d). Fraudulent concealment tolls the statute of limitations until the party having the cause of action discovers the fraud or should have discovered it by the exercise of due diligence. Curry v. Thornsberry, 354 Ark. 631, 128 S.W.3d 438 (Ark. 2003); Shelton v. Fisor, 340 Ark. 89, 8 S.W.3d 557 (Ark. 2000).

    Statutory Claims


    Arkansas Deceptive Trade Practices Act is codified at A.C.A. § 4-88-107, which provides a list of unconscionable trade practices that are made unlawful and are prohibited by the statute, including, but not limited to, false representations, disparaging goods, or services of another and taking advantage of a consumer who is unable to protect his or her interest because of physical infirmity, ignorance, or illiteracy.

    The Deceptive Trade Practices Act is enforced by the Consumer Protection Division of the Office of the Attorney General of Arkansas. A.C.A. §§ 4-88-104, -105. However, it is important to note that this statute (and other state statues like it) has been preempted by federal law, including the Federal Insecticide, Fungicide, and Rodenticide Act, in certain circumstances. Hardin v. BASF Corporation, 290 F.Supp.2d 964, 973 (E.D. Ark. 2003).

    Construction Damages

    Cost of Repair

    It is Arkansas policy that calculation of damages should make economic sense and should not be practically foolish. Brill, Ark. Law of Damages, (5th ed.), § 4-9. Arkansas will measure damages in construction cases by the cost of curing defects, rather than the breach of contract remedy of “difference in value”, except where the actual curing of the defects would cause unreasonable economic waste. Carter v. Quick, 263 Ark. 202, 209, 563 S.W.2d 461 465 (Ark. 1978).

    “The courts’ preference for the cost of repairs measure and the economic waste exception are devices to avoid the situation where the contractor is required to tear down a structure, or otherwise commit economic waste, to correct a defect that does not detract from the market value as much as it would cost to repair it.” Williams v. Charles Sloan, Inc., 17 Ark. App. 247, 251, 706 S.W.2d 405, 407 (Ark. App. 1986). However, the courts' preference for the cost-of-repair measure and the economic waste exception does not limit the injured buyer to only one measure of damages, Pennington v. Rhodes, 55 Ark.App. 42, 53, 929 S.W.2d 169, 175 (Ark.App.,1996).

    Diminution in Value

    No Arkansas law discusses whether there is a cap on the number of repairs; that is, whether an award more than the original value of the improvement would be economicwaste.6 Repair costs are particularly appropriate when the owner has a personal reason, as opposed to a merely commercial objective, for the restoration of the improvements. Unlike other jurisdictions, no Arkansas cases discuss “stigma” damages, the additional diminution in value connected with the improvements even after repairs or restoration have been completed. Such damages may be particularly appropriate in cases involving numerous construction defects, termite infestation, or the presence of mold.

    Delay Damages

    When a contractor delays completion of a building, the proper measure of damages is the rental value of the building during the time that the owner is deprived of its use. Cinnamon Valley Resort v. EMAC Enterprises, Inc., 89 Ark.App. 236, 246, 202 S.W.3d 1, 7 (Ark.App. 2005), citing Long v. Chas. T. Abeles & Co., 77 Ark. 150, 91 S.W. 29 (Ark. 1905).

    Prejudgment interest is compensation for recoverable damages wrongfully withheld from the time of the loss until judgment. Prejudgment interest is allowable where the number of damages is ascertainable by mathematical computation, or if the evidence furnishes data that makes it possible to compute the amount without reliance on opinion or discretion. Where prejudgment interest may be collected at all, the injured party is always entitled to it as a matter of law. Ozarks Unlimited Resources Co-op., Inc. v. Daniels, 333 Ark. 214, 224, 969 S.W.2d 169, 174 (Ark. 1998) (citations omitted); see also Ray & Sons Masonry Contractors, Inc. v. U.S. Fidelity & Guaranty Co., 353 Ark. 201, 114 S.W.3d 189 (Ark. 2003).

    Punitive Damages

    The purpose of punitive damages is to deter and punish the wrongdoer. Wheeler Motor Co., Inc. v. Roth 315 Ark. 318, 327, 867 S.W.2d 446, 450 (Ark. 1993). One cannot recover punitive damages if the sole cause of action is based in contract. Id. However, one should not be prevented from receiving punitive damages in a contract action where the basis of revocation or rescission is misrepresentation, fraud, or deceit. Id. Punitive damages are available in a deceit action even if restitution rather than compensatory damages is awarded. Id.

    Attorney's Fees

    The court may assess reasonable attorney’s fees and grant an award to the prevailing party in any claim to recover in contract. Ark. Code Ann. § 16-22-308. An action alleging breach of the warranty of fitness and habitability is an action on the contract allowing for an award of attorney’s fees. Curry v. Thornsberry, 354 Ark. 631, 128 S.W.3d 438 (Ark. 2003). Additionally, the prevailing party in any suit in which a contractor, subcontractor, or material supplier seeks to enforce a lien, shall be allowed an award of reasonable attorney’s fees. Ark. Code Ann. § 18-44-128.

    The allowance of costs is purely statutory, and in the absence of a statute, the fees of expert witnesses cannot be charged against the losing party. Sutton v. Ryder Truck Rental, Inc., 305 Ark. 231, 239, 807 S.W.2d 905, 909 (Ark. 1991) (citing State Highway Comm. v. Union Planters Nat'l Bank, 231 Ark. 907, 333 S.W.2d 904 (Ark. 1960)).

    Direct Damages

    Arkansas courts prefer a cost of repair measure of damage, which will include the expense of necessary repairs to any real property damaged, the temporary loss damages, plus compensation for any loss of its value during the time the owner was deprived of its use, the special damages, from the time of injury to the time the property could have been restored to original condition, a loss typically determined by the decreased rental value. Brill, Ark. Law of Damages (5th ed.), § 30-1; see also Carter v. Quick, 263 Ark. 202, 209, 563 S.W.2d 461 465 (Ark. 1978); Benton Gravel Co. v. Wright, 206 Ark. 930, 175 S.W.2d 208 (1943); AMI Civil 2007, 2224.


    There have been no judicial opinions in Arkansas addressing Stigma damages.

    Loss of Use:

    When a contractor delays completion of a building, the proper measure of damages is the rental value of the building during the time that the owner is deprived of its use. Cinnamon Valley Resort v. EMAC Enterprises, Inc., 89 Ark.App. 236, 246, 202 S.W.3d 1, 7 (Ark.App. 2005).

    Emotional Distress

    In Arkansas, Emotional Distress damages are not recoverable in a construction defect claim.

    Joint and Several Liability (specific to construction)

    ARK. CODE § 16-55-201 (2003) provides that “in any action for personal injury, medical injury, property damage, or wrongful death, the liability of each defendant for compensatory or punitive damages shall be several only and shall not be joint.” Consequently, each defendant shall be liable only for the number of damages allocated to the defendant in direct proportion to that defendant’s percentage of fault. A separate several judgements shall be rendered against that defendant for that amount.

    To determine the amount of judgment to be entered against each defendant, the court shall multiply the total amount of damages recoverable by the Plaintiff regarding each defendant by the percentage of each defendant’s fault.

    Cost Incurred to Access Repair Areas

    Consequential Damages

    First, Arkansas has adopted the tacit agreement test for the recovery of consequential damages for breach of contract, which is the minority rule. In Arkansas, "the plaintiff must prove more than the defendant's mere knowledge that a breach of contract will entail special damages to the plaintiff. It must also appear that the defendant at least tacitly agreed to assume responsibility." Morrow v. First National Bank of Hot Springs, 550S.W.2d 429, 430 (Ark. 1977).

    Liquidated Damages

    The general rule under Arkansas law governing liquidated damages is that "an agreement in advance of breach will be enforced if the sum named is a reasonable forecast of just compensation for the injury, if the harm is difficult or incapable of accurate estimation." Hall v. Weeks, 217 S.W.2d 828, 830 (Ark. 1949). However, a liquidated damages clause will be "regarded as a penalty if the sum agreed to exceed the measure of just compensation and the actual damages sustained are capable of proof." Phillips v. Ben M. Hogan Co., Inc., 594 S.W.2d 39, 41 (Ark. Ct. App. 1980). Determination of whether damages are capable of proof should be made by examining "the status of the parties at the time the contract is executed and not at the time of the breach." Id. at 41.

    The Arkansas Supreme Court has upheld valid clauses for liquidated damages in construction contracts. However, the Court refused to enforce a provision for liquidated damages for a delay in contract performance where the construction work was substantially performed and there was delay in completion only of minor details. Roseburr v. McDaniel, 227 S.W. 397 (Ark. 1921). The issue of whether a construction project is substantially complete is a question of fact. See Osborne v. Sutter, 220 S.W. 481, 483 (Ark. 1920). Furthermore, the Arkansas Supreme Court affirmed the trial court's finding in Oxborne that the contractor should not be charged with the owner's damages for delay due to causes which were beyond the control of the contractor and not within the parties' contemplation. Id.

    Trigger of Coverage

    Definition of an Occurrence

    In what may be the widest sweeping of these recent statutes, the Arkansas General Assembly passed A.C.A. § 23-79-155, effective July 27, 2011, which provides that all CGL policies offered for sale in Arkansas must include a definition of “occurrence” which includes “property damage or bodily injury resulting from faulty workmanship.” However, the statute goes on to state that it is not intended “to restrict or limit the nature or types of exclusions from coverage” in a CGL policy. There is currently no published case law construing A.C.A. § 23-79-155.

    Duty to Defend

    Arkansas construction agreement indemnity statute aligns with comparative negligence indemnity clauses such that an indemnifying party cannot indemnify the other party for the other party’s own negligence. Ark. Code. Ann. 4-56-104 (b).

    Indemnity arises by virtue of a contract and holds one liable for the acts or omissions of another over whom he has no control. East-Harding, Inc. v. Horace A. Piazza & Assocs., 80 Ark. App. 143, 148, 91 S.W.3d 547, 550-51 (2002). The language imposing indemnity and the nature of the losses to be indemnified must be stated in clear, unequivocal, and certain terms. Capel v. Allstate Ins. Co., 78 Ark. App. 27, 38, 77 S.W.3d 533, 540 (2002).

    Coverage Defenses

    Basic contract principles govern the interpretation of insurance contracts in Arkansas. An insurance contract is construed strictly against the insurer, and the legal effects of the contract are a matter of law, except when the meaning of the language depends on disputed extrinsic evidence. U.S. Fidelity & Guaranty Co. v. Continental Casualty Co., 353 Ark. 834, 841, 120 S.W.3d 556, 560 (Ark. 2003). If the language of the contract is ambiguous, or there is doubt or uncertainty as to its meaning, and it is susceptible of two interpretations, one favorable to the insured and the other favorable to the insurer, the former will be adopted. Id. (citing Drummond Citizens Ins. v. Sergeant, 266 Ark. 611, 588 S.W.2d 419 (Ark. 1979)).

    Consent Judgments

    Consent Judgment: A judgment entered with the consent of the defendant. An insurer that wrongfully refuses to defend its insured runs the risk that the insured will allow a consent judgment to be entered against it. After a consent judgment is entered against the insured, an insurer later found to be in default of its defense obligation may be bound to pay the consent judgment by its terms.

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