In determining insurance coverage, an insurer’s duty to defend its insured is much broader than its duty to indemnify. In order to determine whether the insurer’s duty to defend has arisen, the court must compare the allegations of the underlying complaint to the policy language. Those allegations must be liberally construed in favor of the insured. If the court determines the allegations fall within, or potentially within, the policy’s coverage, the insurer has a duty to defend the insured against the underlying complaint. Outboard Marine Corporation v. Liberty Mutual Insurance Company, 154 Ill.2d 90, 125, (Ill. 1992) (citations omitted). If the underlying complaint alleges several theories of recovery against the insured, the duty to defend arises even if only one such theory is within the potential coverage of the policy. United States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 144 Ill.2d 64, 74 (Ill. 1991).
The construction of an insurance policy’s provisions is a question of law. In construing an insurance policy, the court must ascertain the intent of the parties to the contract. To ascertain the meaning of the words and the intent of the parties, the court must construe the policy as a whole with due regard to the risks undertaken, the subject matter that is insured and the purposes of the entire contract. If the words in the policy are unambiguous, a court must afford them their plain, ordinary and popular meaning. However, if the words in the policy are susceptible to more than one reasonable interpretation, they are ambiguous and will be construed in favor of the insured and against the insurer who drafted the policy. Outboard Marine Corporation 154 Ill.2d at 108-109 (citations omitted). The allegations made in the complaint, even if those allegations are false and groundless, control and must be considered when determining the duty to defend. Illinois Tool Works Inc. v. Travelers Casualty & Surety Co., 2015 IL App (1st) 132350 ¶10.
An insurer’s duty to indemnify is narrower than its duty to defend its insured. The duty to indemnify will not be defined until the adjudication of the very action which the insurer should have defended. The question of whether the insurer has a duty to indemnify the insured for a particular liability is only ripe for consideration if the insured has already incurred liability in the underlying claim against it. If so, the duty to indemnify arises if the insured’s activity and the resulting loss or damage actually fall within the commercial general liability policy’s coverage. Outboard Marine Corporation 154 Ill.2d at 127-128 (citations omitted).
An insurer can be found to have a duty to defend even if it is later found to not have a duty to indemnify. The duty to defend is broader than the duty to indemnify. If there is only coverage for one count of a multiple count complaint, the insurer will have a duty to defend.
The insurance attorneys at McKenna Storer are available to provide further information about the duty to defend and duty to indemnify or other insurance coverage law questions. Contact Kelley Purkey for more information.