{"id":895339,"date":"2019-01-02T16:14:17","date_gmt":"2019-01-02T23:14:17","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=895339"},"modified":"2019-01-02T16:14:25","modified_gmt":"2019-01-02T23:14:25","slug":"insurer-cannot-avoid-duty-to-defend-defunct-insured","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/insurer-cannot-avoid-duty-to-defend-defunct-insured\/","title":{"rendered":"Insurer Cannot Avoid Duty to Defend Defunct Insured"},"content":{"rendered":"\n

Stephen S. Asay | Policyholder Pulse<\/a> | December 26, 2018<\/p>\n\n\n\n

A recent decision in the Middle District of Florida,\u00a0Southern Owners Insurance Company v. Gallo Building Services, Inc.<\/em>, reminds us of the high bar an insurer must clear to avoid its duty to defend an insured\u2014even when that insured is out of business.<\/p>\n\n\n\n

Gallo Building Services was a subcontractor hired to perform various work on a large condo project in Florida. After the project was complete, the condo association identified several construction defects that caused significant property damage and notified the general contractor under Florida\u2019s notice and right to repair statute. To address the association\u2019s claims, the general contractor spent significant sums to investigate and repair the defective work and property damage, and it relocated residents during repairs.<\/p>\n\n\n\n

The general contractor notified its subcontractors, including Gallo, about the claims, and it ultimately filed suit against them to recover its costs. Unfortunately, by that time Gallo was out of business. Fortunately, Gallo had a series of primary commercial general liability and commercial umbrella policies issued by Southern Owners Insurance Company. Although Southern Owners appointed counsel to defend Gallo against the general contractor\u2019s claims, it also filed a separate coverage action against Gallo, in which it named the general contractor as an \u201cinterested party\u201d defendant.<\/p>\n\n\n\n

In the coverage action, Southern Owners sought a declaration that it had no duty to defend or indemnify Gallo in the underlying litigation. Knowing that Gallo was out of business and likely would not defend itself, Southern Owners immediately sought a default judgment against Gallo. However, the general contractor successfully challenged the default judgment and proceeded to litigate on Gallo\u2019s behalf. Southern Owners and the general contractor then filed cross-motions for summary judgment on the insurer\u2019s duty to defend Gallo.<\/p>\n\n\n\n

Southern tried to avoid its defense obligations through a series of arguments\u2014all of which were rejected by the court:<\/p>\n\n\n\n