Liberty Mutual Ins. Co. v. Pella Corp., et al., No. 10-1933 (8th Cir. 2011)
Annotate this CaseLiberty Mutual sued Pella in the district court for declaratory judgment where the suit was sought to determine the scope of Liberty Mutual's obligation, under general commercial liability (GCL) policies issued to Pella, to reimburse Pella's defense costs in two underlying lawsuits. Both parties appealed the judgment of the district court. The court held that the district court did not err in concluding that Liberty Mutual's duty to reimburse Pella's defense costs should be determined by looking at the allegations in the complaint to determine if they stated a covered claim where Liberty Mutual would still have no duty to defend even if it had to reimburse defense costs in a suit where an "occurrence" was alleged but not yet an established fact. The court also held that because the underlying suits did not allege an "occurrence," Liberty Mutual did not owe Pella a duty to reimburse its costs in defending either action. Therefore, the court need not address Liberty Mutual's alternative argument. The court further held that the district court did not commit reversible error in granting summary judgment to Liberty Mutual. The court finally held that, in light of its conclusion that Liberty Mutual had no duty to reimburse Pella's defense costs in the underlying suits, the court need not address the issue of defense costs. Accordingly, the court affirmed the district court's grant of summary judgment to Liberty Mutual on Pella's bad-faith counterclaim. The court reversed the district court's order granting summary judgment to Pella on Liberty Mutual's claim for declaratory judgment and remanded with instructions to enter declaratory judgment in favor of Liberty Mutual.
Court Description: Civil Case - declaratory judgment. Looking at the allegations in the complaint, as required under Iowa law, to determine whether coverage exists, the policies provide for reimbursement of some defense costs and is not dependent upon a determination whether an occurrence has been established. The district court did not err in concluding Pella did not have to exhaust all of its available insurance coverage before Liberty Mutual would owe a duty to reimburse defense costs. Because the two class action suits did not allege property damage caused by an occurrence, but rather alleged defectively designed and construction, Liberty Mutual did not owe Pella a duty to reimburse its costs in defending either action. Bad-faith claims fail because Liberty Mutual had an objectively reasonable basis for denying the claim.
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