Insurer’s Duty to Defend

Four Corners Rule

The insurer’s duty to defend “is resolved by comparing the complaint in that action with the policy issued by the insurer; if the complaint discloses a statement of facts bringing the case potentially within the risk coverage of the policy the insurer will be duty-bound to defend irrespective of whether the plaintiffs in the tort action can or will ultimately prevail” Flori v. Allstate Ins. Co., 120 R.I. 511, 513, 388 A.2d 25, 26 (1978).

“Furthermore, any doubts as to the adequacy of the pleadings to encompass an occurrence within the scope of the policy must be resolved in the insured's favor” Allstate Insurance Co. v. Russo, 641 A.2d 1304, 1306 (R.I. 1994).

Consideration of Extrinsic Evidence

If the complaint discloses a statement of facts bringing the case potentially within the risk coverage of the policy, the insurer has a duty to defend “even if the known facts conflict with the facts alleged in the third-party complaint” Flori v. Allstate Ins. Co., 120 R.I. 511, 514, 388 A.2d 25, 26 (1978).

Occurrence Requirement

General rule

Where “occurrence” is defined as an “accident,” and “accident” is not otherwise defined, an “accident” is “[a]n unintended and unforeseen injurious occurrence; something that does not occur in the usual course of events or that could not be reasonably anticipated; any unwanted or harmful event occurring suddenly, as a collision, spill, fall, or the like, irrespective of cause or blame” Medical Malpractice Joint Underwriting Ass’n of R.I. v. Charlesgate Nursing Ctr., L.P., 115 A.3d 998, 1005 (R.I. 2015), quoting Black’s Law Dictionary at 18.

Faulty workmanship and construction defect claims

Commercial general liability policies “are intended to protect the insured from liability for injury or damage to the persons or property of others; they are not intended to pay the costs associated with repairing or replacing the insured's defective work and products, which are purely economic losses. Finding coverage for the cost of replacing or repairing defective work would transform the policy into something akin to a performance bond” Boisse v. Miller, 2013 R.I. Super. LEXIS 155 at *74-75 (R.I. Super. Ct. Aug. 8, 2013), citing Amtrol, Inc. v. Tudor Ins. Co., 2002 U.S. Dist. LEXIS 18691 (D. Mass. 2002).

Nevertheless, an exclusion for property damage to the particular part of any property that must be restored, repaired or replaced because the insured’s work was incorrectly performed on it, would not exclude property damage to other property on which the insured did not perform work Employers Mut. Cas. Co. v. Pires, 723 A.2d 295 (R.I. 1999); accord, WM Hotel Group, LLC v. Pride Constr., Inc., 2008 R.I. Super. LEXIS 9 (R.I. Super. Ct. Jan. 18, 2008).

Bodily Injury Requirement

Emotional distress

When a policy provides coverage against damage for “bodily injury” the insurer has no duty to defend against a complaint which alleges emotional rather than physical harm. Aetna Cas. & Sur. Co. v. Wannamoisett Country Club, 706 A.2d 1329 (R.I. 1998), citing Mellow v. Medical Malpractice Joint Underwriting Ass’n of R.I., 567 A.2d 367, 368 (R.I. 1989) (in which the policy defined “bodily injury” as “any physical harm, sickness, or disease and includes any care that is required or any services that are lost or death that results from bodily injury”).

Consideration of physical manifestations

See above.

Property Damage Requirement

Purely economic loss

The general rule is that loss of investment is purely economic loss and not injury to or destruction of tangible property Allstate Ins. Co. v. Russo, 829 F. Supp. 24, 27 (D.R.I. 1993).

Loss of use

No instructive authority.

Trigger of Coverage for Latent Injury i.e. exposure to asbestos, silica and lead paint

Continuous trigger

Where a general liability policy provides coverage only for property damage which “occurs” during the policy period, coverage is triggered when the property damage, which includes property loss, “manifests itself or is discovered or in the exercise of reasonable diligence is discoverable.” CPC Int’l, Inc. v. Northbrook Excess & Surplus Ins. Co., 668 A.2d 647, 650 (R.I. 1995)

“Discoverable in the underlying exercise of reasonable – diligence” means that (1) the property damage occurred during the policy period, (2) the property damage was capable of being detected, and (3) the insured had reason to test for the property damage Textron, Inc. v. Aetna Cas. & Sur. Co., 754 A.2d 742 (R.I. 2000).

Nevertheless, while the dissemination of contaminants, through seepage, for an undetermined number of years constitutes a continuous or repeated exposure to conditions resulting in property damage, such continuous activity constitutes only one occurrence for purposes of an insurance policy Truk-Away, Inc. v. Aetna Cas. & Sur. Co., 723 A.2d 309 (R.I. 1999).

Injury-in-fact trigger

No instructive authority

Another trigger

No instructive authority.

Trigger of Coverage Non-Latent Injury

General

There is a single occurrence when the court determines that there was one proximate, uninterrupted, continuous cause which results in the injuries. A single occurrence exists even if there are several discrete elements of damages and several injured parties or property. A series of related injuries comprise a single occurrence for insurance coverage purpose where the injuries, though separate in time and place all flow from the same uninterrupted proximate cause. Town Of Cumberland v. Rhode Island Interlock Risk Management Trust, Inc., 2001 R.I. Super. LEXIS 98 (R.I. Super. Ct. Sept. 17, 2001), citing Bartholomew v. Ins. Co. of N. Am., 502 F.Supp 246 (D.R.I. 1980)

Construction Defect Claims

No instructive authority

Duty to Defend Covered and Uncovered Claims

If any one of the acts alleged in the complaint against the insured could possibly be covered under the policy, then the insurer has an unequivocal duty to defend the insured against all of the claims Nortek v. Liberty Mut. Ins. Co., 858 F. Supp. 1231 (D.R.I. 1993)

Duty to defend contractual indemnity and common law indemnity claims

General contractor against insured

Where a commercial general liability policy limits coverage to losses occurring at a specific premises, the insured is not entitled to coverage for liability arising out of a contractual undertaking to indemnify another party for a loss occurring away from those premises Cheaters, Inc. v. United Nat'l Ins. Co., 41 A.3d 637 (R.I. 2012).

Is there an anti-indemnification statute?

Yes, under R.I. Gen. Laws § 6-34-1 (2016):

§ 6-34-1. Construction indemnity agreements

(a) A covenant, promise, agreement, or understanding in, or in connection with or collateral to, a contract or agreement relative to the design, planning, construction, alteration, repair, or maintenance of a building, structure, highway, road, appurtenance, and appliance, including moving, demolition, and excavating connected with a building, structure, highway, road, appurtenance, or appliance, pursuant to which contract or agreement the promisee or the promisee's independent contractors, agents, or employees has hired the promisor to perform work, purporting to indemnify the promisee, the promisee's independent contractors, agents, employees, or indemnitees against liability for damages arising out of bodily injury to persons or damage to property proximately caused by or resulting from the negligence of the promisee, the promisee's independent contractors, agents, employees, or indemnitees, is against public policy and is void; provided that this section shall not affect the validity of any insurance contract, worker's compensation agreement, or an agreement issued by an insurer.

Insurer’s Wrongful Refusal to Defend

Reliance on coverage defenses to deny indemnity

Where an insurer wrongfully refuses to defend an insured, the insurer will be obligated to pay, in addition to the costs of defense and attorneys’ fees, the award of damages or settlement assessed against the insured, even if the amount is in excess of the policy limits. The insurer may exercise one of two options instead of completely refusing to defend its insured: It may enter into a nonwaiver agreement with the insured whereby it agrees to defend the insured, and the insured recognizes the right of the insurer to question coverage; or the insurer may bring an action against the insured for a declaratory judgment on the question of coverage. In failing to reserve its right to contest coverage, the insurer assumes the risk of being found in breach of its duty to defend at a subsequent time Conanicut Marine Servs. v. Insurance Co. of N. Am., 511 A.2d 967 (R.I. 1986).

Conditions of Coverage

Late notice

Factors considered to determine if coverage is forfeited

A requirement in an insurance policy that notice be given to the insurer “as soon as practicable” or “immediately” does not mean instantaneous notice. Rather, the condition is satisfied if the insured acts diligently and with all reasonable dispatch, having in mind all the circumstances and facts of a particular case. In determining whether notice was given within a reasonable time the following circumstances, among others, have been considered to be relevant: the length of delay in giving the notice, the reasons for the delay and the probable effect of the delay on the insurer Pickering v. American Employers Ins. Co., 109 R.I. 143, 159-60, 282 A.2d 584, 592-93 (1971).

Prejudice requirement

With respect to an “occurrence” liability policy, consideration of the effect of the delayed notice involves the extent, if any, of prejudice suffered by an insurer because it was not notified of a loss or claim within the reasonable time. It is most appropriate that a carrier not be permitted to declare a forfeiture of the bargain-for protection unless there has been a breach of the notice provisions and the likelihood that the carrier has been prejudiced thereby. The carrier has the burden of showing such prejudice Pickering v. American Employers Ins. Co., 109 R.I. 143, 160, 282 A.2d 584, 593 (1971). A technical breach of the notice provisions in a policy should not bar an insured from recovering the benefits for which he has paid, absent a showing of prejudice to the insurer. Included within the term “notice” are such items as the furnishing of a proof of claim and a copy of the summons and complaint. Id.

By contrast, since the reporting period prescribed in a “claims-made” insurance policy defines the scope of coverage, and allows the insurer to set its premiums below the levels charged for comparable “occurrence” policies, prejudice may be presumed where notice is not provided within the policy period of a “claims-made” policy DiLuglio v. New England Ins. Co., 959 F.2d 355, 359 (1st Cir. 1992). Nevertheless, absent a provision requiring notice within a set period after policy expiration, standard claims-made policies “implicitly allow … reporting of the claim to the insurer after the policy period, as long as it is within a reasonable time” Textron, Inc. v. Liberty Mut. Ins. Co., 639 A.2d 1358, 1362 n.2 (1994), quoting 2 Rowland Long, The Law of Liability Insurance, § 12A.05[3A] at 40 (Supp. 1991).

Meaning of “arising out of”

Coverage grants/agreements

“The phrase ‘arising out of’ within policy language is generally considered to mean ‘flowing from’ or ‘having its origin in,’ thereby ‘indicating that there only need be ‘a’ causal connection, rather than a proximate causal connection’” American Commerce Ins. Co. v. Porto, 811 A.2d 1185, 1194 (R.I. 2002), quoting 7 Couch on Insurance 3d § 101:54 at 101-147-48 (1997) (emphasis in original).

Exclusions

The term “arising out of” in the context of an exclusion should be construed narrowly as intending to limit the scope of coverage to incidents with a causal connection to the actual injury Hingham Mut. Fire Ins. Co. v. Heroux , 549 A.2d 265, 266-67 (R.I. 1988).

Other policy forms

See above. The meaning of the phrase is the same.

Coverage for punitive damages

Insurable?

No, the Supreme Court of Rhode Island “believes that the sounder approach bars the wrongdoer from shifting the punitive damages to the insurer” Allen v. Simmons, 533 A.2d 541, 544 (R.I. 1987).

Distinction for statutory multiple damages?

No instructive authority.

Additional Insured Endorsement

Contract or writing required

No instructive authority.

Analysis and factors considered for liability arising out/caused by of the named insured’s work

No instructive authority.

Coverage B- Personal and Advertising Injury

Meaning of publication for “oral or written publication of material, in any manner, that violations a person’s right of privacy” offense

No instructive authority.