Coverage extensions

Exclusions

Limit of insurance

Insuring Agreement

 We will pay all sums an "insured" legally must pay as damages because of "bodily injury" or "property damage" to which this insurance applies, caused by an "accident" and resulting from the ownership, maintenance, or use of a covered "auto".

We will also pay all sums an "insured" legally must pay as a "covered pollution cost or expense" to which this insurance applies, caused by an "accident" and resulting from the ownership, maintenance, or use of covered "autos". However, we will only pay for the "covered pollution cost or expense" if there is either "bodily injury" or "property damage" to which this insurance applies that is caused by the same "accident".

We have the right and duty to defend any "insured" against a "suit" asking for such damages or a "covered pollution cost or expense". However, we have no duty to defend any "insured" against a "suit" seeking damages for "bodily injury" or "property damage" or a "covered pollution cost or expense" to which this insurance does not apply. We may investigate and settle any claim or "suit" as we consider appropriate. Our duty to defend or settle ends when the Liability Coverage Limit of Insurance has been exhausted by payment of judgments or settlements.

Analysis:

 The business auto coverage form (BAP) ties liability coverage to an "accident", a term defined on the form. General liability coverage forms have used "occurrence" as the triggering event, but the BAP has no need to use such an omnibus term. The use of "accident" adequately conveys the purpose of the auto liability coverage to apply to unforeseen, unplanned, and unexpected events pertaining to the use, maintenance, or ownership of autos.

 Another part of the insuring agreement is coverage for "covered pollution cost or expense", a term that is defined in the auto form and that puts some limits on the coverage found under this agreement. For more information on this term, see Business Auto Definitions. However, it is important to note here that the insurer will only pay for the covered pollution costs if there is either bodily injury or property damage that is caused by the same accident that causes the covered pollution cost or expense.

 The insurer has the right and duty to defend any insured against a suit asking for the types of damages specified above. There is no intention on the part of the insurer "to defend any insured against a suit seeking damages for bodily injury or property damage to which the insurance does not apply". As a general rule, however, the duty to defend is said to be broader than the duty to pay damages. If the allegations of a complaint against the insured are potentially within coverage, even if they may be false or fraudulent, the insurer is ordinarily obliged to defend. If a complaint against the insured contains numerous allegations, some potentially within policy coverage and others that are not, the insurer will still usually be required to defend. In addition to expressing its right and duty to defend, the insurer also reserves the right to investigate and settle any claim or suit as it considers appropriate; the insurer's duty to defend or settle ends when the liability coverage limit of insurance has been exhausted by payment of judgments or settlements.

 The promises to pay damages and to defend any claim or suit asking for those damages are separate and independent promises. The insurer has a duty to indemnify and a duty to defend an insured. That is why defense costs are considered to be in addition to the limit of liability. For example, if the policy has a limit of liability of $300,000, this full amount is available for indemnification; an attorney's fee of $10,000 plus court costs of $2,000 will not reduce the limit of liability by the $12,000 figure. However, the insurer's duty to settle or defend does end when the limit of liability has been exhausted by payment of judgments or settlements

 Who Is an Insured