Insurers’ Duty to Defend Determined by Class Definition, Not by Named Plaintiffs’ Claims

This post is contributed by R. Steven DeGeorge, an attorney at Robinson Bradshaw & Hinson, whose practice focuses on insurance coverage, product liability, toxic tort and environmental disputes.

We don’t often report on insurance coverage issues in this space, but the importance of possible coverage for expensive class action litigation should not be overlooked. On May 13, Judge Voorhees issued a decision addressing how an insurer’s duty to defend class action litigation is affected by the definition of a putative class. The policyholder was sued in multiple putative class action lawsuits alleging damages caused by building products it manufactured. The policyholder requested the insurer to defend the lawsuits. The insurer refused, relying on the fact that its policies expired years before the named plaintiffs allegedly suffered their damages. The policyholder successfully defended the litigation and asked the Court to order the insurer to reimburse approximately $7 million in defense costs. The policyholder argued that the insurer’s duty to defend should be determined by how the putative classes were defined, irrespective of the facts involved in the named plaintiffs’ claims. The underlying class action suits defined the putative classes broadly to include persons who purchased the policyholder’s products, with no temporal limit. Judge Voorhees agreed with the policyholder, ruling that the insurer had a duty to defend because the broad class definition created a “possibility” of coverage. This is one of only a few decisions addressing this issue. Class actions can be expensive to defend, so this decision should provide some solace to defendants.

[Robinson Bradshaw served as counsel for the policyholder in this case].