A federal court in Alabama has held that an insurer has no duty to defend or indemnify an insured contractor who failed to cooperate in the defense of litigation against it, resulting in an award of sanctions and default judgment. Auto-Owners Ins. Co. v. Premiere Restoration & Remodeling, Inc., 2014 WL 7369391 (N.D. Ala. Dec. 29, 2014).

A contractor was sued for faulty work and failing to complete a construction project. The contractor sought coverage from its general liability insurer which provided a defense under a reservation of rights. The contractor then failed to respond to repeated requests by the insurer to respond to discovery and to participate in the litigation. The plaintiffs moved for sanctions as result of the contractor’s failure to answer discovery and the court granted the motion, entered a default judgment against the contractor and awarded damages.

The insurer filed a declaratory judgment action asserting that the contractor’s failure to cooperate in the defense breached its duties under the policy and relieved the insurer of its obligation to defend and indemnify the contractor. The court ruled that the absence of participation deprived the insurer of an opportunity to defend and granted summary judgment in favor of the insurer, finding that the contractor’s failure to respond to the repeated requests for cooperation was a material and substantial breach that prejudiced the insurer.