Underlying Complaint Allegations Did Not Create Duty To Defend Under Additional Insured Coverage Where Entity Did Not Actually Meet Policy’s Additional Insured Definition
Federal Ins. Co. v. American Medical Systems, Inc., 2016 U.S. App. LEXIS 22213 (9th Cir. Dec. 9, 2016)
Categories: Duty to Defend – Additional Insureds – Use of Underlying Allegations to Establish Additional Insured Status
In Federal Ins. Co. v. American Medical Systems, Inc., the Ninth Circuit affirmed a summary judgment determination that an insurer had no duty to defend an entity that did not actually qualify as an additional insured notwithstanding the entity’s argument that, if the facts alleged in the underlying complaint against it were true, it would qualify as an additional insured.
“Although it is true that the carrier must defend a suit which potentially seeks damages within the coverage of the policy,” the Ninth Circuit reasoned, “whether AMS is entitled to a defense under the policy depends, as a preliminary matter, on whether it is entitled to enforce the policy at all. … The district court correctly concluded that AMS was not an insured under [the] policy without resort to the allegations against AMS in the underlying tort litigation.” In doing so, the Ninth Circuit primarily cited on Chicken Delight of Cal., Inc. v. State Farm Mut. Auto. Ins. Co., 25 Cal. App. 3d 841, 848 (1973) (concluding that the party seeking coverage “was neither a named nor an additional insured on the … policy,” making it “unnecessary to consider” application of “the basic rule that the duty to defend arises when the insurer ‘ascertains facts which give rise to the potential of liability under the policy’”); id. at 860 (Stephens, J., concurring) (“Clearly, … the Gray duty to defend does not arise automatically upon the filing of a complaint that alleges facts which, if true, would cause a defendant who was allegedly an unnamed insured to fall within some policy’s definition of an additional insured.”)
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