“Discerning the Duty to Defend: When A Company is Incorrectly Named In A Lawsuit”
In the piece, I discuss insurance companies’ duty to defend when a plaintiff names the wrong entity – your company – to a lawsuit:
In tort litigation — asbestos bodily injury tort litigation in particular — corporations occasionally are served with (and become parties to) lawsuits in which the plaintiffs named the wrong entity as a defendant to the action. In those instances, does the wrongly named corporation’s insurance company have a duty to defend the action? In a word, yes.
Using an example of a hypothetical company, I illustrate what could happen in tort litigation and in the process of seeking to enforce an insurance company’s duty to defend when the plaintiff has named the wrong company, but the hypothetical company has been served with the lawsuit nonetheless:
Let’s consider the hypothetical company of “Smith Insulation, Inc.” Surely a risk manager or claim handler can imagine instances in which Smith Insulation, Inc. is served with a complaint that names some variation of the company’s name as a defendant, such as “Smith.” That is not uncommon in asbestos litigation. Even if Smith Insulation, Inc. was wrongly named as a defendant — perhaps there was another company with a similar name, like Smith Insulators Corporation, that allegedly caused the injury or damage — Smith Insulation, Inc. should be defended by its insurer(s) nonetheless.
I explain why there is a duty to defend such claims, starting with the following basic premises:
Standard form general liability insurance policies have a duty to defend policyholders, even if the claims against the policyholders are groundless, false, or fraudulent. When a complaint, if liberally construed, could be covered under a policy with a duty to defend, the insurance company “must come forward to defend the insured no matter how groundless, false or baseless the suit may be.”
Generally, an insurance company’s duty to defend arises whenever there is a potential for coverage, even if the underlying complaint is vague or poorly drafted.
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