{"id":896423,"date":"2019-09-11T09:59:31","date_gmt":"2019-09-11T15:59:31","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=896423"},"modified":"2019-09-11T09:59:34","modified_gmt":"2019-09-11T15:59:34","slug":"does-mediation-trigger-duty-to-defend-cgl-insurance-policy","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/does-mediation-trigger-duty-to-defend-cgl-insurance-policy\/","title":{"rendered":"Does a Mediation Trigger the Duty to Defend Under a CGL Insurance Policy?"},"content":{"rendered":"\n

Joshua Fruchter | Merge Mediation Group<\/a> | September 4, 2019<\/p>\n\n\n\n

Standardized commercial general liability (CGL) insurance policies impose a \u201cduty to defend\u201d that obligates insurers to defend insureds against \u201csuits\u201d seeking damages for claims potentially covered by the policy. The existence of a duty to defend is determined by the allegations in the \u201csuit\u201d filed against the insured.<\/p>\n\n\n\n

Does a mediation qualify as a \u201csuit\u201d under a standardized CGL policy? That question was recently litigated in Illinois state court. See Illinois Tool Works, Inc. v. Ace Specialty Ins. Co.<\/em>, 2019 IL App (1st) No. 18-1945 (August 23, 2019). In that case, the insured manufacturer, ITW, operated a facility at a location (referred to as \u201cAUS-OU\u201d) that was later declared a Superfund site by the United States Environmental Protection Agency (EPA) after the discovery of environmental contamination.<\/p>\n\n\n\n

In August 2004, another manufacturer notified ITW that it was negotiating with the EPA concerning the payment of cleanup costs related to the AUS-OU site, and claimed that ITW was partially responsible for those costs because manufacturing activities at ITW\u2019s facility had allegedly released hazardous substances. In response, ITW agreed to share in the expense of remediating the AUS-OU site, and entered into a mediation with the EPA and other manufacturers to allocate cleanup costs. ITW notified its insurers about the mediation, and submitted bills for costs incurred, but the insurers did not reimburse ITW for those costs.<\/p>\n\n\n\n

Subsequently, ITW was sued for contribution to cleanup costs for an adjacent site (\u201cSite 36\u201d). The insurers funded ITW\u2019s defense of the Site 36 lawsuit.<\/p>\n\n\n\n

After the Site 36 lawsuit settled, ITW filed an action against its insurers seeking a declaratory judgment that the insurers had a duty to defend and indemnify it for claims against it regarding both the Site 36 lawsuit and the AUS-OU mediation. The insurers acknowledged that they had a duty to defend ITW in the Site 36 lawsuit, but argued that the same duty did not apply to the AUS-OU mediation because it was not a \u201csuit\u201d under the policies.<\/p>\n\n\n\n

The trial court agreed with the insurers that the AUS-OU mediation did not trigger a duty to defend because it was not a \u201csuit\u201d under the policies.<\/p>\n\n\n\n

On appeal, ITW abandoned its argument that the mediation qualified as a \u201csuit\u201d under the policies, and instead maintained that the duty to defend triggered by the Site 36 lawsuit extended to the AUS-OU mediation because the contamination at issue in the Site 36 lawsuit and the AUS-OU mediation arose out of the same allegedly hazardous releases. That argument failed, and the appellate court affirmed.<\/p>\n\n\n\n

Why did ITW decide, on appeal, not to press its argument below that the mediation qualified as a \u201csuit\u201d under the policies? The appellate court\u2019s decision indicates that the relevant policies were issued to ITW\u2019s predecessor between 1974 and 1985.<\/p>\n\n\n\n

As per an August 2002\u00a0article\u00a0published on the International Risk Management Institute, Inc. (IRMI) website by risk management consultant Craig Stanovich, it was only in 1986 that standardized CGL policies began defining the term \u201csuit\u201d to include (i) arbitration proceedings \u201cin which such damages are claimed and to which the insured must submit or does submit with our consent;\u201d and (ii) \u201cany other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.\u201d<\/p>\n\n\n\n

While the definition of \u201csuit\u201d in the new standardized CGL policy does not specifically mention mediation, it seems clear that mediation would qualify as an \u201calternative dispute resolution proceeding.\u201d Importantly, however, the new definition of \u201csuit\u201d obligates the insured to obtain the insurer\u2019s consent to submit to an ADR proceeding before the insurer becomes obligated to defend the proceeding. Accordingly, assuming a mediation qualifies as a \u201csuit\u201d under the policy, an insured would first need to obtain the insurer\u2019s consent to participate in pre-litigation mediation before the insurer would be obligated to cover mediation costs.<\/p>\n\n\n\n

At any rate, given that ITW made its insurers aware of the mediation, and they appeared to have consented (or at least not objected), ITW might have prevailed under the newer definition of \u201csuit\u201d that imposes a duty to fund the costs of an \u201calternative dispute resolution proceeding\u201d to which the insurer consents.<\/p>\n\n\n\n

The importance of obtaining the insurer\u2019s consent to ADR is illustrated by a recent California federal court decision. See Harper Constr. Co., Inc. v. Nat\u2019l Union Fire Ins. Co.<\/em>, 377 F. Supp. 3d 1134 (S.D. Cal. 2019). In Harper<\/em>, the court held that even if an insured\u2019s interaction with the federal government in a construction dispute under the Contract Disputes Act constituted a form a type of ADR proceeding under the new CGL policy, the duty to defend was not triggered because the insurer had never consented to the proceeding.<\/p>\n","protected":false},"excerpt":{"rendered":"

Joshua Fruchter | Merge Mediation Group | September 4, 2019 Standardized commercial general liability (CGL) insurance policies impose a \u201cduty to defend\u201d that obligates insurers to defend insureds against \u201csuits\u201d seeking damages for claims potentially covered by the policy. The existence of a duty to defend is determined by the allegations in the \u201csuit\u201d filed… Continue reading Does a Mediation Trigger the Duty to Defend Under a CGL Insurance Policy?<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[10,30,13],"tags":[9895,270,57,6647,79],"class_list":["post-896423","post","type-post","status-publish","format-standard","hentry","category-duty-to-defend","category-general-liability-policy","category-mediation","tag-advise-consult","tag-cgl-insurance-policy","tag-duty-to-defend-2","tag-illinois","tag-mediation-2","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nDoes a Mediation Trigger the Duty to Defend Under a CGL Insurance Policy? - Advise & Consult, Inc.<\/title>\n<meta name=\"description\" content=\"Does a mediation qualify as a \u201csuit\u201d under a standardized CGL policy? 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