For years I have discussed South Carolina and the unpredictable, evolving, and sometimes perplexing treatment of insurance coverage as they pertain to construction defect claims. As our law firm is based in the state of Mississippi, I have invited one of my partners, James Harper, to discuss the nuts and bolts of insurance coverage for construction defects in the Magnolia state. Today’s article will focus on a carrier’s duty to defend a policyholder in a lawsuit.
THE DUTY TO DEFEND A POLICYHOLDER LIES IN ALLEGATIONS
Under Mississippi law, “the duty of the insurer to defend is determined by the allegations of the complaint.” Great Northern Nekoosa Corp. v. Aetna Cas. and Sur. Co., 921 F.Supp. 401, 406-07 (N.D.Miss. 1996) This is the law of the state and is applied literally. “If the underlying pleadings state facts which bring the injury within the coverage of the policy, then the insurer is required to defend.” Id. “Conversely, if the pleadings do not state facts which bring the injury within the coverage of the policy, then the opposite is true.” Id. The focus of courts is on allegations contained in the four corners of the complaint and only if the pleadings state facts bringing the injury within the coverage of the policy must the insurer defend. See Foreman v. Continental Casualty Co., 770 F.2d 487, 489 (5th Cir.1985) (emphasis added); Battisti v. Continental Cas. Co., 406 F.2d 1318, 1321 (5th Cir.1969).
Allegations made in a Complaint are controlling. Thus, “the ultimate liability of the insurer is not the criterion for determining the insurer’s duty to defend . . . if the factual allegations of the complaint bring the action within coverage of the policy, irrespective of what the actual facts may later prove to be, the insurer is contractually bound to defend its insured.”)(citing Preferred Risk Mutual Insurance Company v. Poole, 411 F. Supp. 429 (N.D. Miss. 1976)).
It is possible for an insurance carrier to trigger a bad faith cause of action by failing to defend a policyholder. The burden in these matters is on the policyholder, however. Specifically, the insured must prove that a proper investigation would easily adduce evidence showing its defenses to be without merit. Mutual Assur., Inc. v. Banks, 113 F.Supp.2d 1020 (S.D. Miss. 2000).
In closing, we would like to always remind the reader that every case is fact specific, and this blog content does not constitute legal advice.