In Liberty Mutual Insurance Co. v. Pella Corp., the United States District Court for the Southern District of Iowa issued orders setting forth Liberty Mutual’s responsibilities with regard to coverage for two putative class action lawsuits filed against its insured, a window manufacturer. The main issue in dispute was when Liberty Mutual’s duty to reimburse the insured’s defense costs was triggered under commercial liability policies.
The insured argued that Liberty Mutual’s obligation to pay defense costs was triggered by the mere allegations in the underlying complaints that those plaintiffs sustained covered property damage. Liberty Mutual disagreed, taking the position that an actual “occurrence” was needed to trigger the duty to reimburse defense costs. Furthermore, Liberty Mutual argued that its policy was a true excess policy, and that the insured’s self-insured retention was not exhausted until after coverage under any other applicable policies was exhausted. The insured argued that once the amount of the self-insured retention had been met, Liberty Mutual was required to reimburse defense costs without the insured having to first exhaust its other policies.
In its decision, the court noted that the policies were ambiguous on the issue of whether an actual “occurrence” was required to trigger Liberty Mutual’s obligation. The court then found that the insured’s interpretation was reasonable. The court next decided that the policies were intended to provide primary, and not excess coverage. The court reached this decision in part because the policies did not require the insured to maintain another primary policy as a condition of coverage, and Liberty Mutual’s policies were in fact the insured’s only coverage for five of the six years that they were in effect.