Suppose that you are involved in a Construction case presenting Insurance Coverage issues. The Policyholders, a General Contractor and various Subcontractors, have been sued. The claims against them are based on damages from alleged construction defects including alleged improper construction of exterior walls, of the roof, of decks, and in the installation of siding and flashing at an apartment complex.
Suppose further that the underlying lawsuits have been tendered to the appropriate Commercial General Liability carriers for defense, and that for various reasons, all but one of the CGL carriers either begin to defend and then stop at some point, or they outright deny the G.C. and the Subs a defense. However, one of the nondefending CGL carriers participates in a global settlement of accumulated claims joined by the G.C. and the G.C.'s CGL carrier which defended. The settlement totals $3.4 Million and the defending carrier sues the nondefending carriers for contribution or indemnity for the costs of the G.C.'s defense and settlement.
That presents a potential issue of the Statute of Limitations for a breach of the Liability Insurance Contract based on an alleged wrongful refusal to defend. Under the defending carrier's view -- the view of the one seeking contribution or indemnity for the defense expenses it incurred on behalf of the G.C. -- the breach of contract "was constantly accruing under the 'continuing wrong' doctrine -- that 'where a tort involves a continuing or repeated injury, the cause of action accrues at, and limitations begin to run from, the date of the last injury.'" St. Paul Fire & Marine Ins. Co. v. North River Ins. Co., 2012 WL 4464380 *4 (D. Colo. September 27, 2012).
However, the nondefending Liability carriers' view of the thing has the virtue of simplicity: The defending carrier knew when they did not provide a defense. Their alleged breaches ran from that date. See St. Paul Fire & Marine Ins. Co. v. North River Ins. Co., 2012 WL 4464380 *4 (D. Colo. September 27, 2012).
Under Colorado law for example, a contract which requires a series of performances over a period of time may allow discrete claims for discrete and separate breaches of contract. Under Colorado law, then, the Plaintiff may assert a claim for all breaches of contract within the period of limitation. The Colorado Statute of Limitation provides a three-year limitation on claims for breach of contract. Accordingly, the defending Liability carrier was allowed to sue for contract breaches within the three-year period of limitation, subject to the Court's application of this limitation period to each of the nondefending Liability carriers. St. Paul Fire & Marine Ins. Co. v. North River Ins. Co., 2012 WL 4464380 *5 (D. Colo. September 27, 2012)(further holding in addition with respect to one of the nondefending Liability carriers in particular, which disclaimed its duty to defend several times, "[e]ach disclaimer gives rise to a separate breach subject to a separate limitation period.").
There is nothing like the tried and true first rule of deciding whether or not to provide a defense under a Liability Insurance Policy: When in doubt, provide a defense under a Reservation of Rights.
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