Insurance Law

Court Holds that the Insured’s Per-Claim Self-Insured Retention Applies on a Per-Home Basis Based on Language in Policy’s SIR Endorsement

Evanston Ins. Co. v. N. Am. Capacity Ins. Co., 2014 U.S. Dist. LEXIS 92682 (E.D. Cal. July 8, 2014, [enhanced version available to subscribers])

In Evanston, the Eastern District of California held that the insurer’s duty to defend under two consecutively issued CGL policies was not triggered until the insured satisfied the $10,000 self-insured retention (“SIR”) as to each of the several hundred homes involved in the five underlying lawsuits.

Evanston arose out of five lawsuits filed on behalf of hundreds of homeowners against a construction company insured by two general liability carriers – Evanston and NAC – under five consecutively issued policies. All of the policies at issue insured against “claims” and defined “claim” to mean “a request or demand received by any insured . . . including the service of suit . . . .”

The insured tendered its defense to both carriers. Evanston agreed to defend the insured against each lawsuit, but NAC refused based on an SIR Endorsement in its policies. That SIR Endorsement stated that coverage would not be provided until the policy’s $10,000 per-claim retention was satisfied “regardless of the number of claims from a single occurrence, suits brought or number of claims incorporated into one such suit.” NAC took the position that, based on this endorsement, the policy required payment of a $10,000 retention per home before coverage was triggered under its policy. Both NAC and Evanston participated in the settlement of the underlying action, and Evanston subsequently sued NAC for an additional settlement contribution and for contribution toward the insured’s defense. NAC filed a motion for partial summary judgment on this issue, and the district court granted its motion.

In reaching its ruling, the court noted that the language of the SIR Endorsement clearly anticipated the potential that a lawsuit could involve multiple claims. While the insured argued that the court’s ruling rendered the “including the service of suit” component of the “claim” definition meaningless, the court disagreed and held that this language simply contemplated that a lawsuit could qualify as a “claim” and that the policy does not contemplate that every lawsuit qualifies only as a single “claim.”

Originally published in California Insurance Law Quarterly - Fall 2014 Newsletter 12.16.14

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